|Personal or Business Bank Account.|
What should I do with my first Adsense cheque?
Just wondering what I should do with my first adsense cheque ($100). Should I pay it into my personal bank account or should I pay it into a business account? Are there any advantages to either?
I expect to earn more in the future, worse case scenario another $100 in 2006.
(I live/work in the UK)
In the US, I set up a dba to keep my personal and business money separate. That way, if the tax man starts looking at my stuff he will only look at my business side and not my personal stuff (I have a real job).
Just put the $100 in your personal account.
europeforvisitors, would you say the same thing if it was a $1000 cheque?
Yes, I would, unless you had a complicated business setup (such as a staff with payroll).
The important thing isn't where you deposit the checks or EFT payments, but how carefully you keep track of your earnings and expenses.
Ok, but seeing as I have a business account already (With nothing in it) are there any draw-backs to paying the money into a business account?
If there are no real pros/cons then I may as well use the business account so that when it comes to filling out a tax return, I can easily get the info that I need.
Depends if there are any charges associated with paying in/taking out money from your business account.
At least with UK personal accounts, there aren't usually any fees attached to transactions (assuming the cheque is already in Sterling and doesn't need converting from $)
Well my first payment of $100 USD was by cheque, so that I could get a photocopy ;) I've now switched to eft though.
My business account is currently with HSBC (with £0 balance!) and they DO have charges as I've had the account open for years.
I think I'll just close down the HSBC account and switch to Barclays then as they have a 'No charges until you have £10,000 balance' or something similar.
Ok, 2nd part of my question...
What do I do about Mr.Taxman? I'm earning a full-time wage and Adsense is simply beer money at the moment. What should I be doing? Do I declare it? Do I need to contact an accountant as I have no idea how to fill out a tax-return.
Yes, you need to declare your AdSense earnings.
I don't know anything about UK tax laws, but in the U.S., you'd normally declare your small-business income on Schedule C, which is a form that's used to record business earnings, expenses, and net profit or loss. The net profit or loss is then transferred to your main tax form (Form 1040). I imagine there's something similar in Britain. Your public library should have information on taxes for small or home-based businesses, and if you buy tax software, the software should have a questionnaire that walks you through the steps needed to declare business revenues, expenses, and profit or loss. (I use TurboTax for my U.S. taxes, and it makes the process quite easy once you have a broad understanding of the revenue/expenses/profit or loss concept.)
Thanks for that europeforvisitors. Would really appreciate any advice from some UK Adsense users.
I think you would probably put this through as if you are a sole trader. I cannot really comment as we run as a Ltd company, where it is a bit different.
But essentially if you are running as a business then you pay personal taxation on whatever you pay yourself out of the business...whether as a employee or sub contractor.
Corporation tax is only due on profit, which does not include salary etc. I think it is 22% under £1 million.
Anyway, I doubt any of that would apply. Check out [businesslink.gov.uk...] for details and links.
As you are employed, you will be paying tax through PAYE, and your personal allowance will taken into account.
Adsense income would need to be declared in the "self-employment" section of the tax return, along with any other income earned outside your regular employment.
If, as you say, you're only earning "beer money" at present, then the tax office is likely to class your adsense as a "hobby". If it increases to a level where you could legitimately call it a business, you will need to let them know you are "self-employed" - and yes, you can be both employed and self-employed at the same time.
At that stage, you would of course pay tax on any profits from self-employment, but you can legitimately offset expenses such as hosting, domains, etc against your "profits". Obviously you would need to keep back the percentage of your adsense income to donate to the taxman, at whatever rate you're currently paying.