The tax return nobody mentions

7 July 2026

HMRC taxes the profits of a trade regardless of whether the trade is lawful, and says so in print. The consequences for cash income are worth understanding early.

Recruitment material for escort work talks about cash, about no invoicing and about no banking. All of that is accurate and none of it means the income is untaxed.

What HMRC says

The Business Income Manual at BIM22005 states that income tax is charged on the profits of a trade and that this basic position is not affected by the fact that the activities, either in whole or in part, are illegal. BIM22008, headed with the principle that there is no moral test, records the courts' position that liability depends on statutory construction rather than moral disapproval.

The test for whether something is a trade, at BIM22010, is whether the activity involves the provision of goods or services to a customer on a commercial basis. Escorting meets it plainly.

The thresholds

The first £1,000 of gross trading income in a tax year is covered by the trading allowance, and below that there is nothing to register and nothing to file. Above it, Self Assessment applies.

The dates are fixed and unforgiving: register by 5 October following the end of the tax year, file on paper by 31 October or online by 31 January, and pay any balancing amount by 31 January. Penalties for a late return apply whether or not tax is owed.

National Insurance in 2026/27

Class 2 is no longer payable. Profits at or above the Small Profits Threshold of £7,105 are treated as though it had been paid, which protects the State Pension record without a charge. Below that, voluntary Class 2 at £3.65 a week is available. Class 4 is 6 per cent on profits between £12,570 and £50,270, and 2 per cent above.

Why it matters more than it seems

Two reasons. The first is Making Tax Digital, which from April 2026 requires quarterly digital reporting from anyone with qualifying income over £50,000, dropping to £30,000 in April 2027 and £20,000 in April 2028. Informal record keeping stops being viable as those thresholds descend.

The second is that unreported cash income does not stay quiet indefinitely, and the version of this problem that surfaces five years late is considerably more expensive and considerably less private than the version handled at the time. Registering with HMRC puts nobody on a public register.

The full position, with the current figures, is on tax and self-employment.