HMRC is writing to those it believes have undeclared income from the breeding of animals, including dogs and cats.
Over the last few months, HMRC has doubled down on those it believes have undeclared income. The move started back in January when HMRC required online ecommerce platforms, including AirBnB, Etsy, eBay and Vinted, to share details of the traders using their sites and the income those users have made.
In the latest swoop, HMRC has written to those it believes have undeclared income from the breeding and sale of animals including pet cats and dogs.
The British people are renowned as a nation of animal lovers, with an estimated 30% of UK households owning at least one dog. This number was boosted during the COVID-19 lockdowns. With some in-demand breeds commanding thousands of pounds per puppy or kitten, some breeders can make thousands of pounds from a single litter.
So, what are the rules on additional income for animal breeders?
Declaring income on the breeding or sale of animals for 2023/24
UK residents are allowed to earn up to £1,000 without paying tax. This is the total amount you can earn from any "channel" including income from items you have made to sell on, brought specifically to resell or sold for someone else via an online marketplace. Once you have earned more than £1,000, you must register for self assessment.
If you made more than £1,000 by breeding or selling animals in 2023/24, you must:
- register for self assessment by 5 October 2024
- complete a self assessment by 31 October 2024 (deadline for paper returns), 30 December 2024 (for online returns where HMRC calculates what tax you owe) or 31 January 2025 for online returns
- pay any tax owing by 31 January 2025
When you register for self assessment, you will be issued with a unique taxpayer reference within ten days. HMRC uses this reference number to identify you, to process your tax returns and to allocate your payments against your tax bill.
Need to know: You do not have to pay tax on the sale of personal items. For example, if you are selling clothes your children have grown out of.
Declaring income from the breeding or sale of animals in earlier tax years
HMRC has begun writing to those it believes have undeclared income in previous tax years from the breeding or sale of animals. It has informed those people that they should use the online voluntary disclosure service within 30 days. Once the process has begun, they have 90 days to complete their disclosure and pay any tax due.
If HMRC has not yet written to you, you should register for self assessment (if you are not already registered). Once registered, you should contact the self assessment helpline and request the self assessment tax returns you need (tax returns for previous years are not available online via your online tax account unless you have requested them from HMRC).
If you wish to declare that you have deliberately avoided declaring tax (tax fraud), you should use HMRC's contractual disclosure facility (CDF). This method should only be used those who wish to admit tax fraud.
By entering the CDF, taxpayers will:
- admit deliberate conduct that resulted in a loss of tax;
- tells HMRC about all the tax losses as result of their actions;
- provide as much detail as possible within 60 days;
- provide an additional report which includes a statement that they have given HMRC complete and accurate details of their conduct.
In turn, HMRC will agree not to investigate or bring a criminal prosecution for the deliberate conduct the taxpayer admits to in the CDF. However, interest will be due on any tax that has been paid late. You should pay any tax you think is owing when you submit your CDF. This will help prevent more interest accruing and demonstrates your willingness to co-operate with HMRC.
Possible tax penalties for animal breeders
HMRC charges interest on tax that is paid late.
Even if you make a voluntary disclosure, you may also be charged a penalty by HMRC. If a penalty is charged, it will be calculated based on the fact that you have made a prompted disclosure. Penalties can range for 0-30% of the tax owing for an unprompted disclosure or 15-30% for a prompted disclosure.
Written by Fiona Prior.
