If you are planning to earn money online in the UK then there are a few tax legalities you must comply with.
It’s not complicated to do and does not take a lot of time each year but it is important you know them before beginning to work for yourself online.
NB; The details below are for a UK online home business, were correct as of March 2017 and are for guidance purposes only.
1, Register your business with the HMRC
You will want to contact the HMRC once you begin working for yourself and let them know you have started.
You will want to declare yourself as a sole trader and to tell them your business name.
Your business name can be your own name or a specific one chosen for the business.
2, Register for Self Assessment
At the same time as registering your business you can also register for self assessment.
This means that you can then pay any income tax due on your business profits to the government at the appropriate time.
3, When is your tax payment due?
The UK tax year runs from April 6th to April 5th the following year. Any income earned within these dates is liable for income tax to be payed on it.
The final date you can pay your tax is January 31st But this payment will be a year in arrears.
EG; If you earned £1000 on April 10th 2016 this would mean you would not have to pay any tax on this until the latest of January 31st 2018.
You can pay it earlier but effectively any income earned between April 6th 2016 to April 5th 2017 does not have to be declared until January 31st 2018.
4, Claiming Expenses
Here is the good part. You can deduct from your business income certain expenses that you have to do with your business.
These expenses can be such things as,
- Telephone calls
- Website payments
- Software purchases
- Heating in your home
- Electricity in your home
- Council Tax
All of these expenses have to be related to your business and not your own personal use.
EG; Lets say you earn £40,000 in a tax year working for yourself but you also have £10,000 of expenses in the same tax year.
This would mean you only have to pay tax on £30,000 of your income to the tax man.
Eyes Wide Open
Hopefully by now you have a better idea of your UK tax requirements when starting to work for yourself online and you can go into it with eyes wide open.
If you are still a little uncertain then by all means let me know by sending me a message on my Contact Page.
Otherwise head on over to HMRC where you can get all the details and more as well as register your business.