Let’s talk about tax baby, let’s talk about you and me, let’s talk about all the good things and the bad things that may be…
If you’re a blogger looking to make a bit of extra cash from your blog, you have probably tried to look for information on tax and maybe got confused on all the things you can claim, have to declare and the whole process of it. Which isn’t a surprise really; HMRC is a complex machine and if you don’t know how it works, trying to read the manual might confuse you even more.
So, without further ado, let me take you on a rollercoaster.
What does HMRC have to do with blogging? I’m not employed and this is just a hobby?
HMRC has its claws on everything. The HMRC definition of ‘hobby’ can be very different from yours. If you’re signing up to affiliate programs, accept advertising or request compensation for writing a post, you’re seeking profit and thus you’re looking at a business, not a hobby. If, on the other hand, you write just for fun and one or two companies send you goods for reviews, you can argue that it’s a hobby.
For every single penny of inflow you get, you should be declaring for tax & National Insurance purposes. Notice how I say inflow rather than income? Because income can be seen to be money only. At the moment, a lot of countries are changing their tax legislation wording to take social media influencers into consideration, and are pulling goods in exchange for a review in to the scope of tax. This isn’t the case in the UK as of yet, but if we look at the spirit of the taxation legislation, it’d be difficult to not justify big-ticket items as taxable. Don’t count every bottle of body butter, but if you get an iPhone, it’s a whole different ballgame.
I make just pennies though/I already have a full-time job where I pay tax?
Doesn’t matter. If you’re looking to consistently make money with your blog, you still have to register and declare. This is not optional. If you’re unsure, register (or phone HMRC on 0300 200 3300). You’re going to lose absolutely nothing by registering and you’ll be covered in all eventualities; HMRC isn’t going to punish you for sending a zero income return!
But I heard that there’s a £11,000 allowance I don’t pay tax on?
True. This is called “personal allowance”. If you were one of my clients with no knowledge of tax, I would try to get you to think that the personal allowance is taxed at 0% rather than it being free of tax; this is an easier way of getting your head around the need to declare for this amount as well.
There is NO amount of inflow that you can just ignore.
Still with me?
When should I register?
As soon as you start thinking about making money with your blog. At that point, it stops being a hobby and becomes a profit-seeking enterprise in HMRC’s eyes.
Self-assessment is one of those things that I feel should not be left to last minute and it’s always better to be prepared. Technically you have till 5th of October of the year (tax years run 06/04 – 05/04, so for income earned 04/04/2016 you’ll need to register by 05/10/2016), but don’t leave it that late! Once you’re registered, it’s over and done with so you don’t have to think about it.
So, how do I register?
You go here and register as a ‘sole trader’. Registering your company as a sole trader is the same as registering for self-assessment. You see, if you’re a blogger, you’re a company owner. Have a glass of bubbly, you’re a business(wo)man now!
Don’t fret if you’ve registered and not got your paperwork through the post within a few days; it can take up to two weeks to get there, so have patience.
I’ve registered, what does this mean?
This means that for everything that you get in is taxable and you should prepare to hand over 20% to HMRC at the end of the year. So don’t spend it all, but put that money aside so you don’t struggle in January when it’s time to pay!
The actual tax rate depends on a few things like whether you are currently employed, what your salary is, what your profit level is etc. You don’t really need to worry about calculations; HMRC will do that for you when you submit your return, but I always save 20%<32,000>40%, so if your profit for 2015 was 45,000, save 20% of £32,000 and 40% on £13,000. You’ll then definitely be covered and will have a positive surprise at the end of it, not a shock payment.
Also, if you make more than £5,965 in the year, you’re due NI Contributions – for self-employed these are called ‘Class 2’ contributions, and are £2.80 for each week you’ve been self-employed. So, if you’ve been self-employed through the whole year, you’re due £145.60 on top of your tax bill.
What do I do with all of this then?
So you’ve registered, made some money and now it’s time to submit a return. Every year, your due date for submitting a return is 31st of January if you do it online. So for the tax year ending 05/04/2016, you’ll need to submit your return by 31/01/2017. If you submit and pay late, HMRC will fine you so the sooner you do it the better! I’d suggest submitting a return as soon as you’ve been paid for your last job you did for the previous tax year. Another good reason to submit early is that the HMRC site tends to get overloaded on 31/01 with thousands of people trying to submit their returns all at once, and it will crash, just like it does every year. To avoid that frustration, submit early!
Submission is fairly straight-forward; you go to the HMRC online service and login with the details you got in the post, enter in what you’ve earned, what claimable expenses you have and the software will churn out what you need to pay. The boxes for input are fairly self-explanatory, but this blog post shows you the steps:
Next time – what can I and can’t I claim & blogging and other employment.
I’m always up for improvement; are there portions you didn’t understand? What topics would you like to know more about?
*disclaimer: This cannot be construed as definitive advice as situations are not all the same. Should your affairs be slightly more complicated, please consult an accountant. I have made some sweeping generalisations here, and there will be exceptions to the rules, some of which I will cover further on in the series. If you’re in doubt, phone HMRC on 0300 200 3300
See also posts elsewhere;