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Tax implications

Discussion in 'Making Money' started by codingmackem, Apr 25, 2011.

  1. codingmackem

    codingmackem Newbie

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    At what point is making money online no longer deemed a hobby and becomes something that you would need to declare seriously to the tax man??

    This question is mainly targeted at UK users, however all suggestions are welcome
     
  2. MisterTwister

    MisterTwister Regular Member

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    Any profit you make online is technically taxable as an income. However, they have to find you first.

    A sure way to attract the attention of HMRC is using ebay or gumtree!

    Cmon the Toon! :p
     
  3. codingmackem

    codingmackem Newbie

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    It was going so well until that comment!

    I was thinking more along the lines of affiliate networks and adsense. I appreciate its all taxable but surely there is a level where they think it isn't worth the hassle.

    At the minute I am very low level of earnings like less than 2k per year, but I am trying to increase that and was wondering at what point am I going to start declaring fully!
     
    Last edited: Apr 25, 2011
  4. MisterTwister

    MisterTwister Regular Member

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    Which networks do you use and in which country they are based?

    Some larger networks will report your earnings no matter how small to HMRC - Commission Junction in the UK would report but I am not sure if ClickBank does but I know Clickbank collect VAT on UK sales and pay it as they are the final retailer of the digital product.

    I would say 2k is nothing to worry about.

    Are you registered self employed or PAYE?

    Is this your only income?
     
  5. codingmackem

    codingmackem Newbie

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    I use adsense and webgains/buy.at

    I think webgains definitely notify hmrc which was the motivation for this post really

    I am not currently registered self employed and i work full time as a php dev, so this isn't my only income just something of a sideline that is starting to increase, leading me to thinking of declaring it if it continues to grow over the coming few months!
     
  6. MisterTwister

    MisterTwister Regular Member

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    Good thinking - If it grows into any kind of business best just bite the bullet and declare.

    Problem is that I always find the more you try to do things right the more you get penalised, inspected and more red tape added, which is typical of the UK.

    Good luck!

    CoderGeordie...

    BTW. If you call them to register self-employed tell them you only started in the last 3 months any longer and its an automatic £150 fine! (thats what I mean about trying to do things right!)
     
    Last edited: Apr 25, 2011
  7. codingmackem

    codingmackem Newbie

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    Thanks for the thoughts mate hopefully I will have to deal with this issue in the not too distant future!
     
  8. dgaunn4114

    dgaunn4114 Junior Member

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    I looked into this. In the US, if you are "self-employed" (which is what the majority of us are), then you have to pay "self-employment" tax of 13%. This tax is deducted from your income tax. If you make less than $5000/year (or I believe 1.5x the poverty line...could be wrong about that), you don't have to pay any income tax, but you still have to pay the self-employment tax. There are ways around the ways to reduce it. I, for example, charged my $1000 laptop as a business expense, because I'm in Internet Marketing :). This reduced my bill by $130! I am not familiar with the UK code, but I'd imagine it is somewhat similar.
     
  9. efwebs

    efwebs Regular Member

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    If you signed up to an ad network with a government ID number (social security number in the states) then the government knows about your income and you should claim it

    whether it is a hobby or business just determines the kind of deductions you can make
     
  10. HOmERCIdAL

    HOmERCIdAL Regular Member

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    You should technically declare everything, From April 2011 to April 2012 the personal allowance is £7,475.

    Although I am in no way qualified to advise I would say that as long as you paying your stamps you could be okay with the little you are earning.

    This is a good site: business gateway (apparently I have to be a member for longer than friggin April 2009 to post links!.)
    It should answer most if not all of your questions.

    Also the free seminars are pretty good too.
     
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  11. codingmackem

    codingmackem Newbie

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    Haha, but thanks for the point in that direction the site looks very similar in build/style to business link!
     
  12. florflor

    florflor Senior Member

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    When I first told them, it was more than 3 months.

    Look they won't fry you for owning up.

    Just don't wait a year.

    You know the score, that you're supposed to report it. So own up now.

    Don't worry, you won't have to pay any tax on tax yr 11/12 earnings till end of January 2013!

    They'll start sending you a request to tax return. You do it online, its easy.
     
  13. codingmackem

    codingmackem Newbie

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    It is more about the bureaucracy for the reward, it was more of a question of at what monetary point should I declare it. I think the answer is just declare it now and be done with it?
     
  14. florflor

    florflor Senior Member

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    Believe me mate, there is no bureaucracy, you should try filing taxes in other countries where you need an accountant just to make any sense of it, lots of to and fro communications, negotiations, delays etc.

    Filing self-assessment is a piece of piss, just keep your P60 each year, keep P45s if you leave work, then give them a turnover and expenses figures for your online stuff. That's it.

    When you do it, ask for a form for small business NI exemption for class 2 NICs or whatever it si, they will send you one and you return it. That's it.

    Don't worry about the delay. Most people don't even know this rule. Think about it, typical ebayer or anyone getting a bit of money on the side has no idea it means "self employed" or "business".

    Just tell them you started making some money, did not know what you had to do but now want to start filing taxes and doing a self assessment. They will NOT fine you 150.

    They say "fine 150 if not within 3 months" as a scare tactic for those who see it. When I did mine, I was over 6 months overdue, they did nothing.

    btw you miss the point by saying "what monetary point". If you earn £1, you declare it. But most people don't know this. They think a few bob here and there is legal. It isn't. But HMRC aren't gonna prosecute everyone.

    Mate, even if you have a loss, file a return. You can file these losses against future years. I did that and it came in very handy.
     
    Last edited: Apr 26, 2011
  15. codingmackem

    codingmackem Newbie

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    I didn't miss the point I get the fact you earn you declare (in theory). I suppose I am trying to fatham at what point people believe/know that at what monetary point HMRC are gonna prosecute! Haha

    Never mind thanks for the info/ point of view I think you have a valid point about just start declaring and save the aggro. I will have to look into the NI exemption for class 2 NICs, that sounds like good advice!
     
  16. florflor

    florflor Senior Member

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    Well everyone will have a different view on it. All you can do is guess.

    But it's not worth trying to stall it, you're serious so you need to file taxes soon anyway and taxes are a complete and total doddle to file in the UK.

    So basically just go for it. As it sounds like you're doing anyway.

    I know paying taxes is shit but nowt you can do about that I'm afraid. Unless you live in a 3rd world country like India or Thailand or somewhere in Africa it is quite difficult to avoid paying them.
     
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