AdSense and UK Tax

[Richie0x]

Just registered with AdSense. It's going very well - wish I'd started it last year.

However, I'm worried about the Tax issue. I live in the UK. Do I have to register as self employed?

[PCInk]

I believe that you do have to register. If you got to the point of getting over £54000 a year, turnover (for all income on the self-employed side), you have to also register for VAT. Although that can have its benefits.

Don't forget that if you register as self-employed you also can get benefits too. Lately there has been a 100% write-down allowance on computer equipment. So if you bought a new £1500 computer, you get a £1500 tax allowance. (That is not £1500 back in your pocket, but £1500 on which you do not pay any tax at all). You get access to company cars or mileage claims against the business and many other benefits that people do not often consider. For example, use your car 50% for work, 50% for business? Use the car wash? Get a receipt for it - you would be entitled to 50% of the VAT back (if VAT registered) and 50% income tax back. It's not a lot, but it all adds up. Then there is your domain name costs and hosting that you can put down as a business expense. Most UK banks offer free business accounting software - ask to speak to a business advisor and they'll often just give you the CD.

Best to read inlandrevenue.gov.uk and hmce.gov.uk (VAT).

[valley]

Definitely you should register and keep records of accounts.
As said above you can 'write off' a lot of expenses, including use of home as office,( heating electricity, etc ) software and hardware domain costs hosting and accountancy fees.
You could be looking at about £230 -£500 accountancy fees , depending on the amount of service you need .
The better records you keep the easier and cheaper it becomes.

After a year trading you should make your first tax return, I doubt VAT will concern you unless you will earn in excess of £56,000.

If you have no other income and after all allowance deductions you will pay no tax up to £4,615, there after there is a sliding scale 10% 22 % etc.
[netaccountants.com...]
Also ,if nett profits are above £4,615 as self employed you would need to pay class 4 national contribution stamps ( self emplyed stamps at about £2 per week).

There is nothing better then peace of mind and honesty.

[PCInk]

> I doubt VAT will concern you unless you will earn in excess of £56,000.

Just to be clear on the law on VAT. It is not how much you earn (profit) that states whether you need to register for VAT, but turnover.

So if you promoted your site heavily and all costs add up to £50,000 and the income is £56,000 then you have only earned £6,000, but you still must register for VAT.

But you can voluntarily register for VAT before that, if you think it may be of benefit.

For most small businesses, accountants are not worth the money. I imagine for most AdSense customers it would not be worth the cost. Accountants usually get paid by saving you at least the amount they cost. You usually need a fairly large(ish) turnover before this becomes beneficial.

[Richie0x]

This sounds like a load of hassle to me :S

We're talking under £1,000 per year income from AdSense here at the moment, if that makes any difference?

I also have a real job, and (unfortunately) the income from that combined with the AdSense revenue will not exceed £3500.

[longen]

Also,
the Adsense cheques for March/April - isn't there an overlap there - i think the UK year ends around 5th April?

[PCInk]

Then there would be no benefit (or very little) to being VAT registered.

If you are earning £3500 in total then it is very simple.

1) Register for self-employed
2) Keep account records yourself (no accountant fees)
3) Fill in a self-assessment form every year *

* This requires you to complete details on student loan repayments, bank interest, wages from your employer and other places where income tax should be paid or deducted. Then you need to complete three other boxes - total expenditure, total costs, and then calculate the profit.

An individuals tax allowance is usually at least £4000 (unless you had a company car or van for personal use) so they would calculate the tax for you and write back to you. The figure would be £0 owed to the tax man!

The only other thing would be National Insurance, where self-employed people need to pay £2 per week which keeps you entitled to full state pension (if there is one when we all retire!).

And then, you need to remember to keep invoices for at least 7 years to prove to the tax man the amounts going through the business.

[PCInk]

P.S. even though you do not have to pay tax on £3500, you still have to register - not doing this can result in a fine (likely) or even imprisonment (unlikely).