Do I have to pay taxes on income from my website or profits?
I've started to generate a small amount of revenue on my website, I'm obviously tracking my income and expenses, but I'm not certain whether I need to declare this income to Inland Revenue.
Is there a threshold of earnings before I need to declare? and do I deduct my expenses from the income?
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Not sure about the UK, but if it were in the US you need to realize the expenses can be claimed as much as the income.
After having a mild heart attack when I did my business taxes the first time many years ago, a Small Business Administration adviser pointed it out.
You are running the site from a computer? Deductible on an amortization schedule. Do you work from home? Electricity can be deducted. Do you drive at all? Did you pay yourself a wage? Any paperwork, fax communications, bank fees that you had to endure as work expenses?
I am not an accountant, but chances are you legally lost quite a bit more than you made in a new web venture. Discuss it with an accountant for the details and more importantly the laws in your country. I could be off my rocker.
I am not an accountant, but I do run a business in the UK and my understanding is that it's a threshold thing, which I believe is £2,500.
Assuming you don't currently have to submit self assessment, and your additional income from all sources other than employment (for which you already pay tax) is less than £2,500, you don't have to declare it.
Above this level you have to submit self assessment.
More information can be found here
I also find that HMRC are quite helpful - give them a call and ask.
Income is income... it depends how it's structured.. personal or corporate.. but still you need to pay taxes... if you get audited, the tax man could look at your bank statements and ask, "where is this money coming from"
You need to set your status as self-employed the day you started online work. If that date is a little ambiguous (as is usually the case with online business), you can start with the day you first made any money.
Yes, you can deduct expenses from your revenue. But you have to be sure that the expenses were purely business related.
This is how it goes:
You inform HMRC about the day you started work. HMRC will assign you a UTR (Unique Tax Reference) number. Depending on how much you make you might or might not need to pay Class 2 NI contributions. You'll need to tell HMRC how much you expect to earn in the current tax year.
Finally, you'll need to complete a Self-Assessment at the end of the tax year.
I highly recommend setting up a business banking account. Here is a link that discusses being part-time self-employed in the UK.
Being a tax professional, my understanding is that the threshold limit is a single limit for all your source(s) of income. Now many people who already draw salary which is liable to tax, develop application for mobile and generate some income. Such income is liable to tax, if along with other income they exceed the threshold limit.
Income will have surely related expenses. And the expenses which are related to earning of the income are allowed to be deducted.
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