I was talking to my dad today about making money online by designing websites and blogs but he was talking about how would i pay tax on it? so it got us thinking. how do u guys pay your tax?

(Direct from the mouth of my business-minded partner, who works at the DWP ): If you're self-employed you have to file a tax return at the end of the tax year. You're taxed on profits (so keep your receipts for expenses, and even the "dumb ones" like electricity can be taken into account). The rule of thumb is to keep 25% of your pay to one side in order to cover tax, NI, etc. You don't have to collect VAT unless you make, or plan to make, more than GBP61,000 in a given tax year.

 

Self-employed people should also be paying Class 2 National Insurance contributions and, if they make over a certain amount (I don't remember the amount but it's not much) you should also be paying Class 4 NI contributions, which is essentially a tax because you have to pay it but it doesn't increase your pension in any way.

I was talking to my dad today about making money online by designing websites and blogs but he was talking about how would i pay tax on it? so it got us thinking. how do u guys pay your tax?

 

 

Basically, your taxed on your profits.

 

You register as self-employed with the HMRC. You keep a recording of your income (sales) and outgoing (things you buy for your business).

 

At the end of the tax year (runs April - April) the HMRC (Inland Revenue) send you a Self Assessment Tax return in which you enter all your financial figure (how much you took, how much you spent) and if you send it back before the cut-off date, they work out how much tax you pay - which you must pay.. and on time!!

 

That's a pretty simple description of your business tax.

Well im only 17. so i dont have to pay anything till i have earn my first 2000 quid. after that ill have to start filling in the forms. damn the government.

Just out of interest, where did you get the £2000 figure from?

School.

 

Only in a brief lesson. We've not been told about anything to do with tax. lol

£2000? I'm sure it's more than that - I've got an accountant and so don't need to worry about any of it, I'm crap with maths/figures and so just pay someone else to sort it all out for me. I just put all my income and expenditure into a spreadsheet every year and he figures out how much tax I need to pay and what things I can claim for etc. I'm sure that I can earn up to about £4500 before having the start paying tax...so if I had a really really bad year and earnt under that amount [highly unlikely] I wouldn't pay any tax. So not sure where your £2000 figure has come from.

I think everyones talking it wrong.

 

I was told that u don't have to pay tax until you have earnt your FIRST ever £2000.

 

Thats not every year. Just when u FIRST start working. After you have earnt £2000 you have to pay tax.

 

Like if i was 16 and got a job at tesco's. untill id earnt £2000 i wouldn't pay tax. after that i would! Get me??

I'm too old to know anything about earning your first £2000 - so long ago...

haha.

 

Its only what i have been told. lol

 

I dont have a job so im i dont really know.

Where tax is concerned it is better to be safe than sorry....

 

Cromo, if you are unsure about the £ 2000 (which I hadn't heard of - but that doesn't mean anything!) ring the Revenue helpline.

 

Also just another point to add. I design a few websites during the year as well as being employed. If you are in the same position as me earning only a small amount you can claim exemption from making the Class 2 NI Contributions.

 

Can't remember the limit off the top of my head but again these guys are helpful if you call them.

I used to work part-time but freelance on the side and it was still a requirement for me to register as self emplyed and to pay my Class 2 NI contributions every month - but I was making a lot of money on the side...so that's probably why.

I have just had a look at my certificate.

 

The threshold for exemption from Class 2 NIC for 2007/2008 is £ 4635.00

 

Gripping stuff this tax....zzzzzzzz...zzzzzzzzz

I knew it was around £4500

But i dont wanna pay it

welcome to our world.....

 

get yourself a good accountant...preferably a friend so they don't charge you (much).

 

Then you can make make sure you get all your allowances against your income and you take advantage of as many legitimate tax free investment opportunities you can with what you have left.....

 

Premium Bonds, ISAs, Savings Certificates etc.

im 17. i aint doing any of that till i have a job or i take web design as a full job.

 

Im not delcaring earning from selling a template once a month.

Well i have an account on paypal and i have been using them from the last three years . The taxe rate according to my payment is used to get substract from my account automatically .

So that i dont take any ache of paying them off .

If you take the decision not to declare your earnings I think it would be best not to announce it to the world on a forum.

 

I know there is growing concern that people who earn money from online activities such as ebay etc. seem to be under the impression this is somehow exempt from tax. Regular online activities could well be seen as trading.

 

It is important to keep records of your activities and declare them because if you get found out and you cannot prove how much you earned the Revenue will come up with an estimated assessment that could make your eyes water.

 

You are also creating a situation where you could cause grief for your clients because they may be asked to pay your tax (as if they had paid you net) if they have not verified whether you have satisfactory arrangements in place for handling your tax affairs.

 

At the end of the day I am not happy about what the government do with the taxes I pay but I feel that my credibility is increased when I tell a client they will get an invoice from me that they can deduct from their income and they can verify my status with a quick call to the Revenue.

its down to the minimum NI earnings level, which is:

 

minimum wage * 16 hours * 52 weeks

 

= £5.35 * 16 * 52 = £4500

 

after this level, all wages are taxed, and as you are self-employed and profits are effectively wages, so you need to pay NI contributions after you make £4500 in profits.

 

Note that you can "offset" profits with buying things for the business rather than yourself, such as PC's, software, books, hosting etc

But i dont wanna pay it

 

Find me someone who does!

 

Unfortunately, paying tax is part of life. There's no way to escape it. The taxman will hunt you down and take all your money. It's just the way it works.

its the point when the taxman suddenly becomes friendly, picks up a photo of a children and says "Aren't they lovely? It would be shame if they were hurt in some way" that most people begin to object

lmao. So true.

 

Or in my case (because I don't have children), it'd be my car.

 

"So, Rachael, do you own this car?"

 

"N-no Sir, it's on finance..."

 

"Ah yes, well, I don't think finance will ever be a problem for you again..."

well in my country it's not really necessary to pay tax from money earned online. it would be ok if you could declare them at the end of each year as money earned in plus, and pay a small tax for them, but no one does. In E-Store's though... we've got some laws that say that you must have a small bussiness to make something like that.

well in my country it's not really necessary to pay tax from money earned online. it would be ok if you could declare them at the end of each year as money earned in plus, and pay a small tax for them, but no one does. In E-Store's though... we've got some laws that say that you must have a small bussiness to make something like that.

 

What country is that?

Romania. we're [after some statistics] no5 country on piratery too. it's just because authorities don't get involved too much in this business

For anyone not planning on paying taxes it's worth noting that the tax man can go back as far as six years (in the UK, I imagine it's similar in the US and other countries) so whilst it may seem like you're getting away with it for now, they will eventually catch up with you so it's certainly worth declaring it even if you don't particularly want to.

Romania. we're [after some statistics] no5 country on piratery too. it's just because authorities don't get involved too much in this business

 

I think Norway rank pretty high as well. And our authorities do get involved...