So, you now know that for the pennies you earn, you need to register with the HMRC. If you don’t, recap here! Funnily enough, right after I had published that post, someone decided to have an argument with me about the need to register. According to her, unless your income is more than £11,000 you don’t have to register. THIS IS NOT THE CASE! Remember that you’re never going to be punished for registering. Be 100% safe.
So, back to the subject at hand, that being of the ins and outs of your new business. You’ve registered and you’ve made some money. Does this mean that you’re going to pay tax on your earnings and that’s it? The answer is no. Remember that you’re a business now, so technically you’re only paying tax on your profit, that being your income less expenses. So if you earn £200 but spend £100 earning it, you’ll only pay tax on £100.
What constitutes as expenses?
When you blog, you’ll be bleeding money for years. If you’re self-hosted, you’ll have your hosting costs, your domain costs, themes, plugins and all the fancy graphics you’ve bought. You’ve spent money on advertising on other people’s blogs and you’ve bought photoshop and a fancy camera. You’ve bought courses on growing your following and you’ve maxed out your credit cards for blogfodder and marble wallpaper. You’ll consider all of this an expenditure on your blog, but surprise surprise, HMRC doesn’t!
In order for you to be able to claim expenditure against your income, it needs to be wholly and exclusively for blog purposes. So, 100% of its existence is due to your blog.
Let’s have a look at a few of our costs then.
Hosting & domain – if you didn’t have your blog, would you have the hosting & domain? Probably not. Do you use your hosting & domain for anything other than your blog? If you use your hosting provider to hold some files for yourself, you’ll need to calculate the percentage of the space used by your personal stuff and then pro rate your hosting costs (£££ * bloguse %). That is rare though; most of us use our domain and host for blogging/website only – this is wholly and exclusively blog use and thus allowable
Themes & Plugins – do you use these for other than blogging purposes? Hardly. Thus Allowable.
Graphics – do you use these for ther than blogging/sale purposes? Then allowable. Do you use these to make birthday invitations for that 50th birthday you’re organising? Then it’s not wholly and exclusively and not allowable.
Courses – as much as you think that these are wholly and exclusively for blog usage, hmrc doesn’t consider this to be so. Training is only allowed as a deduction if you cannot trade without it. So, for me, my accountancy exams would be deductible as I couldn’t work as an accountant without them. As a blogger, as much as courses help me bring in subscribers and the only reason I bought the course was my blog, I could be blogging without them and thus they are not allowable.
Food & drink/accommodation – this seems to come up a lot. Again, let’s look at the wholly and exclusively thing. If you’re out shopping and decide to pop into a cafe for a wee bite to eat and a drink, you might end up loving it and deciding that you want to write a post about your experience. Your meal was for personal pleasure/use and blogging about it is just an added bonus. This isn’t 100% blog expenditure, thus not allowable.
However, one day you receive and invitation to a blogger event for the opening of a new bar, and they charge £10 at the door. You were planning on chilling in your jimmers that night, dedicating your lips to the delicious flavours of an indian takeaway and a Lidl cola. But you decide that it’s worth it as your readers would enjoy it. So you go and you spend your £10. Yes, you get some pleasure out of it, but you’ve been given the opportunity because of the blog and you’re doing it for the pleasure of your readers. I’d be able to justify this to hmrc as an allowable expenditure.
I’m currently on a mental break in Ayr. I’ve walked about town, taking pictures, eating in cafes and I’m staying in a quirky hotel right in the centre of town, the whole experience of which I will be blogging. As much as I would love to be able to offset this expenditure against any income I may receive, it isn’t for blog purposes, it’s for me to enjoy and I’m just happening to blog about it.
Capital expenditure – by which I mean new laptops, cameras, expensive software etc. Technically these aren’t forbidden, but again – wholly and exclusively… Did you really buy that macbook for blog use only? If you did and you have a personal laptop as well, you can claim it, BUT you have to treat it over the whole life of it.
- First, you’d need to decide how long the laptop is going to stay good/useable. Macbooks are a whole different ball game, but other type of laptops are generally considered “good” for 2.5 years.
- You then need to take the whole cost of the laptop and divide it between these useable years.
- That is the amount that you can claim each year. As an example, you buy a laptop for £500. Your “business” now has acquired an asset of that amount and you’re depreciating it on a straight line basis over its useable life. Sounds fancy, eh? So you’ve got this £500 asset. Depreciating it means just allocating the cost of it throughout your 2.5 years. If you divide £500 with 2.5, you get £200 which is what you can allocate in year 1 and 2. As year 3 is a half a year, you can claim half of year 1 or 2, so £100, bringing your total to £500. In very rare cases, your item might be worth more than what you bought it for, but let’s not get into that – we’ll just assume your case is normal and you can only claim for the amount that you paid for it!
What about all those knick knacks that I bought to make my instagram photos look good?
Well, if you’re like me and have most of those knick knacks in a box, only to be pulled out at an opportune moment for a photo”shoot”, claim away. If however you use them for home decoration, you’re in no luck.
So, this wholly and exclusively thing – what about electricity and that spot on my sofa?
Well, this is where wholly and exclusively don’t apply. For a hobby blogger, I wouldn’t really suggest trying to allocate electricity etc., against your income, but once you start spending 3-4 hours on the computer each day, the costs do add up. If you wanted to be really anal about it, you could get one of those electricity meters and check how much electricity your laptop draws and then you’d times that by how much your electricity costs… But realistically, who’s going to do that? The admin would be worth more than the claim. Work on averages. For me, I’d divide my year’s electricity by hours, half it (for me and the husband), times it by my average hours blogging and then take a third off for good measure. It looks like this; 52*12/(365*24)*(365*3)/2*.66 = 25.74 It ain’t much but every little helps! You could also calculate your gas if you have GCH, but with that, your oven might increase your usage so you’d need to accommodate for that.
Anything else you’d like to know about? Anything particular you’re unsure of with HMRC? Let me know in the comments!
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