Forum Moderators: martinibuster
I run AdSense on my site and am making a few dollars, but still have a way to go until the first cheque. However, I was wondering what the *UK* tax implications of being paid the commission by Google as it is undeniably income.
Does anyone have any thoughts, or know the rules on this?
Welcome to WebmasterWorld ;)
Try this thread [webmasterworld.com...]
Basic answer to your question is nobody knows, but the only way to guarantee your not being taxed would be to permenantly leave the UK
I am currently looking into it.
But we appear to be breaking new ground with this, and the answer will be some time coming. If I want to be legal that is...
Obviously, if you don't think you will be found out, you can open an overseas account. However there are problems with drug money world wide, which has resulted in more exposure to checking of overseas accounts.
So, as I understand it, if you merely opened an account with Barclays in Jersey, that would be reported to UK authorities. Its not worth doing unless the income is high enough, and by definition that is high enough to trigger the report to UK government.
Therefre you have to look further afield....
Firstly, we receive payments from US, UK, Europe and Australia with NO tax taken out (obviously a bit bigger amounts than adsense cheques though as they are professional fees for services etc) - that does not seem to cause a problem though some some US companies have of recent times, asked us to full out some "UB" (or somethinging that sounds like that form). This is for paying into our OZ, Sing, Malayasian or Thai accounts.
So on one side I'm not sure why Google needs to take tax out when our clients pay us without taking any out! So either we have been breaking the law for years or they have.. or google is using some diff form of system.
Basically you have to pay tax on revenue somewhere, and it is illegal not to declare income/revenue in any country ive worked in to my knowledge, no matter its source or country of origin unless you earn so much that is is worth becoming an eternal wanderer or you are living on the dark side of the street!
If, as is usual, there is a taxation agreement between the payer's and payee's country in order to avoid "double taxation", your accountant will know what to do for sure and how to avoid being taxed twice.
We are just leaving it to the accountants to advise. It must be pretty obvious to all that im not an expert here. We will stick to creating web sites and the accountants can worry about tax!
If your tax situation is orthodox (i.e. you live in the UK most of the year, and pay income taxes and NI stamps here), you deal with income from overseas in the same way you deal with income you make in the UK. You simply add up what you have received at the end of the tax year, declare it, then declare your expenses, and the tax man works out your tax liability.
There is nothing special about it because it's from overseas. I am a freelance, and I do a lot of work in dollars. Yet I still pay tax on it.. it's just regular income! Of course, if you're not self employed, you're probably not used to dealing with your own taxes at this level, but it's not hard.
Trying to hide it is not wise, but achievable, particularly if you're a full time employee elsewhere paying PAYE taxes, and if your external earnings are under a certain amount.
I am a freelance, and I do a lot of work in dollars. Yet I still pay tax on it.. it's just regular income!
I am playing with the thought to move to UK. Could you inform us what are tax rates in UK? (just some simple examples please) ... for example if I get 2000 USD from Google monthly how much would I have left from it to myself, if I would live in UK?
The answer to your question is it depends..
What other income you have..tax allowances.. state national insurance contributions, amount allowed tax free of total earnings..
Your best bet is to find one of those web sites that will compute your UK tax, you feed in your own circumstaces and out comes the answer
I am playing with the thought to move to UK. Could you inform us what are tax rates in UK? (just some simple examples please) ... for example if I get 2000 USD from Google monthly how much would I have left from it to myself, if I would live in UK?
As I have just sent off my tax return, I should know this cent for cent. Sadly, I don't, but I have a pretty good general idea.
In the UK 'regular joes' like you and I get taxed in two ways on our income. One through regular income taxes, and two through 'National Insurance' contributions.
As a foreign national, you may not have to pay the latter, I have no idea. 'National Insurance' pays for health, pensions, and the like. If you do not pay enough National Insurance contributions throughout your life, you are not entitled to a full pension in later life.
Taxation for self employed individuals working as a sole proprietor is a lot easier than in the US (the only other jurisdiction I can relate to). You simply take your total income, your total expenses, put them on your tax return, and from that write down your 'profit' (or loss). If your total income (not profit) is over £15000 you then have to fill out and itemise it all, if not, you can go to the next step which is working out your tax liability.
Everyone has a tax free allowance. For a single person it is £4615 in this tax year (and the next). So you can deduct that from your 'profit'. Now, you are taxed at 10% on the first £1920 of your taxable income.. so that's £192 in tax, now deduct £1920 from your profit. You are then taxed at 22% on the next £27979. And then 40% on anything over that.
You then pay this to the tax man, possibly in installments, I believe, although this varies with how much you owe. You don't have to pay until January of the next tax year, nothing is due immediately.
So, let's take your $2000 a month example.. assuming this is about £1250 per month. This is an annual income of £15000. So, you get £4615 for free leaving £10385 as taxable. You pay £192 on the first £1920 of this.. leaving £8465 as taxable. You then pay 22% on this.. making £1862.30. Add £1862.30 to £192, you end up with £2054.30 owed.
So, from £1250 per month, you effectively get to keep £1078.81, or 86% of the booty.
National Insurance then comes separately, although as I said, I do not know if this applies to you. National Insurance is rather more complicated, but always works out as less than income tax. Self employed people have to pay a monthly amount of about £8-£10, and then pay another percentage at year end if their earnings are over a certain amount (something bizarre like another 10.8% of earnings over £52 a week or something). I'd assume 10% overall for NICs. So, you're looking at around £950 worst case scenario from your £1250.. which works out at around $1520 on the same scale.
Of course, things are better than they seem, since the UK tax office is rather generous with expenses, and tend not to be overly anal.
As long as you DO use your car for business, put 80-90% of your petrol receipts through as expenses (rather sadly, I actually DO use 90% of my fuel for business.. lol). All computer equipment, put it through. Some of your telephone bill.. mobile top up cards.. and so on. Anything you can weakly prove you use 'for business'. The worst they'll do is not allow you the deduction.
So, I have to say.. I hate tax, but I think the UK system is extremely fair and progressive, particularly for self employed individuals. I have no complaints.
Good luck!
So, from £1250 per month, you effectively get to keep £1078.81, or 86% of the booty.
This is fantastic! 2nd half of 2004 I am moving to UK. No doubt about it.
Thanks a lot for help. I always loved how effective your great country - UK - is.
By now some of my friends who live in EU were opening companies in UK and I have had problems to understand why. Now I see: you have low taxes and effective system.
Sorry for off-topic subject but it is related to AdSense in the sense that "where to live, in order to get the most out of AdSense, after taxing"... :-)
Some of the readers of this forum don't think AdSense will still be around then!
Also, you will have to bear in mind something called IR35 which gives the tax man rights to collect additional taxes from people who claim to be contractors or self employed, but who are really just contracting for a single company or a single source of money... and are, therefore, employees. If you have multiple income streams, this should not pose a problem.
On these topics, however, you will certainly want to consult a lawyer, or receive advice in a more topical forum.
>>2nd half of 2004
Some of the readers of this forum don't think AdSense will still be around then!
good point! ... but it will not happen - do you think that out of a sudden the CPC will be reduced to zero in AdSense? (minimal CPC in AdWords already now is 5 cents). I see no reason for it, and I believe in Google.
Since I love making content sites and AdSense is mostly about content sites the AdSense very well commensurates with my interests.
The only worry of mine is not to be kick out of google AdSense, because of malevolent people or competition...
To me the only key question is will we be taxed twice - once by the US, and then the country we pay taxes in? Just want to avoid that as that could come to a considerable amount.
IANAL, but almost certainly not. I believe as long as you are not located within the US for a certain amount of time each year (I think it's 180 days or more?), you are not liable to US income taxes.
I have been paid many thousands of dollars by US clients, declare it all in the UK, pay tax on it in the UK, and the IRS has no claim to any of it.
If you are UK resident - but have a foreign domicile - you pay NO income tax on earnings sourced outside of the UK - you only pay tax on UK sourced income.
For people of foreign domicile, the UK is the greatest tax haven in the world.
This is the reason why London is full of Arab oil sheiks!
I would imagine you would have a fair chance of persuading the tax man that your internet income was foreign sourced and therefore tax free - this rule does not help us brits - as someone with a UK domicile pays tax on ALL income, both UK and foreign - if they are resident in the UK.
If we want to get our internet income tax free, we have to move to a tax haven!
If you are UK resident - but have a foreign domicile - you pay NO income tax on earnings sourced outside of the UK - you only pay tax on UK sourced income.
but shoudn't taxes be paid somewhere? "foreign domicile"? well, everything is relative - in my opinion your domicile is where you are...
'Domicile' is a tax term - you can be resident in a country, without being domiciled there.
Domicile - as far as tax is concerned - means generally the country of your birth - so you can be resident in the UK, but if you plan one day - even if it's in 20 years time - to return to your native country, then your domicile remains in your native country.
As far as tax is concerned - domicile is EXTREMELY hard to change - there are many UK tax payers who would LOVE to be able to convince the tax man that their domicile has changed to a foreign country.
If they could do that, they would pay no tax, but they would be free to live in the UK without the restriction of having to spend no more than 90 days here.
It's too complicated to explain - look it up on google - just type ... UK tax foreign domicile
I know it may sound unbelievable, but it is a genuine tax bargain - the UK is practically the only country in the world that has this crazy tax break available - it's a left over relic from the days of empire!
