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One of the questions asked on many forums or money making blogs is “do you have to declare what you make to the tax man?” By and large, it’s an easy question to answer, but there are exceptions to the rules, so let me take you through them.
Firstly, work out your classification: self-employed or not. The Money Advice Service has a handy article to explain all that’s required to find out.
If you are self-employed, then you need to register with the HMRC. You have until the 5th of October that year, to be able to file a tax return. If you do it too late, then you could incur penalties, so do it as soon as you make up your mind that you want to start work.
What Do I Declare and What Don’t I Declare?
If you are clearing out your wardrobe and selling the things you have used or worn then you do not have to declare it. If you purposely buy something to resell on, this is earnt income and needs declaring. This applies to auction sites like eBay.
Auntie May has given you a birthday present which you already have. You pop it on eBay; it sells and you pocket the cash.
Auntie May buys you ten items; you pay her for them. You pop them on eBay and sell all ten at a profit, and pocket the cash.
The first option, you don’t need to declare because it’s an unwanted item given to you for a purpose (your birthday). The second option, you have purposely bought the stock to resell. So you need to declare it.
What Is There To Declare In Blogging?
Bloggers don’t have to report it to the HMRC because they don’t always do things for payment. If you blog but you don’t receive anything in return, then you don’t need to declare anything. The moment you start earning money/goods/shackles with your blog, then you need to inform the HMRC. Bear in mind that we all have an individual allowance that we have to hit before we pay tax and NI. You do still need to register, but you might be exempt from having to pay. They will tell you either way.
Is It Easy?
Yes, registering as self-employed with the HMRC is simple. It’s a comprehensive form where you explain your job details. Once filed the HMRC will send you a ten-digit Unique Taxpayer Reference (UTR). This also goes hand in hand with getting enrolled as self-employed. Keep hold of the code as you will need this when you log on to file your self-assessment return.
How Much Will I Pay?
Well, it depends on how much money you make. Your personal tax allowance is £11,850. Work out what your annual income is, then minus your yearly outgoings. The amount left is what you will pay tax and NIC (National Insurance Contributions) on. So for example;
You earn £12000 before deductions (allowable expenses). The costs work out at £1,456. That, once taken away leaves you a self-employment pay of £10,544. As that is under your personal tax allowance, you will not pay tax on it. But, as it is over £6,205 (the Small Profit Threshold) you pay Class 2 NIC. It is also above £8,424 (the Lower Profits Limit), so you will also pay Class 4 NIC. Thus, you “take home” £10,199.80 per year and the rest goes to pay your NI contributions.
If you are still looking for help, then you can give the HMRC a ring on 0300 200 3310 or check out Bloglancer for a more in-depth look into self-assessment.