I finished college a few weeks ago and instead of going to university, I plan on earning money and saving up. I’m currently 18 and have been looking at templates on themeforest for the last 2 years. I recently joined the website and was looking forward to selling some templates to start saving up some money, however I stumbled upon a thread about paying tax and now I’m starting to get confused about what I need to pay and where.
Some people are saying that you need to pay tax and others are saying you don’t. I haven’t registered for a business (because I don’t consider this to be a business but rather a hobby and hopefully something that earns me some money). Do I have to register somewhere to pay tax? Do I have to pay tax at all? Can anyone put me in the right direction?
I get the feeling someone is going to tell me to speak to an accountant, however I’m 18, unemployed and have only just left college so I haven’t got the money to pay for there advice (I’ve heard they can charge you a fortune for just sending you a letter).
Look forward to a good discussion
I am not 100% sure about how everyone does it but as a word of warning – something to consider is how you set up your commission payment for example Paypal BY LAW has to inform the inland revenue and/or authorities once you receive over a set amount (its something around the 5K mark) into your account.
You will be asked to state if the account is personal, service provider, business etc. With this in mind if you sell a lot of files then the potential fine if you do not declare earnings will be a lot more than the effort required to set yourself up self employed/ltd company etc.
Unfortunately we all have to pay tax and some point, it keeps the country running after all.
The good thing is you don’t pay tax on the first £9440 that you earn in the 2013-14 tax year (from April 6th 2013 to April 5th 2014), this is your personal allowance which everyone gets, as long as you don’t earn more than £100k in that year.
Anything above your allowance and up to £32,010 you will have to pay 20% tax on, and anything above the £32k and up to £150k you will need to pay 40% tax on.
Don’t let the numbers and percentages put you off, it’s really not that bad once you get used to it, and budget it into your profits. The best way is to just put 10-15% of your profits each month into a savings account and don’t touch it. This should cover most (if not all) of your tax bill.
But how can 10-15% cover a 20% tax bill I hear you cry!
Well this is where becoming registered as a sole trader would have it’s advantages, as anything that you buy for use in your business would have an effect on your tax liability.
For instance if you had to buy a computer, laptop, printer etc. the cost of such items (a percentage of anyway) would be deducted from your tax bill. This also goes for things like using your home as an office, you can get deductions for electric bills, phone bills etc.
Please do get the advice of a proper accountant (because I am certainly not one), they’re not that scary and most will not charge for an initial consultation meeting, just phone a couple and ask. They will be able to tell you the best solution for your particular circumstances.
Give me a shout if you have any further questions and I’ll try and help you out with what I know (which isn’t much). I’ve been involved with running businesses or being freelance for the past 15 years so I know the basics.
Wow, sorry but it’s quite naive to think you don’t have to pay any tax… if you’re not starting a Ltd company then you need to register with HMRC as a Soletrader – personally I would consider Ltd company in the long run since you’ll pay less tax but speak to an Accountant – ask around the family and friends, someone may know one who’ll do you a deal…
Accountants can be quite an expensive cost but boy do they save you some money and more importantly the time! Well worth the cost IMO and they’ll usually do a consultation session to start with for free (well mine did) so you can see if you both get along…
Personally I put 30% of everything that comes in aside for tax. This is always too much but it means at the end of the year I get some extra “surprise” savings
Informative thread, helpful for a fellow Brit just starting out like myself
Just to reinforce what everyone else is saying… yes, you do have to pay tax. Register as self employed and you can do your tax returns online.
You’ll have to pay National Insurance contributions as well. I wouldn’t bother with an accountant as the self assessment is all pretty straightforward as long as you keep accurate and detailed records of all your ins and outs. It’s up to you though. I just empty out a big box full of paperwork on the floor on January the 31st, crack open the scotch… and let the good times roll.
Just to reinforce what everyone else is saying… yes, you do have to pay tax. Register as self employed and you can do your tax returns online. You’ll have to pay National Insurance contributions as well. I wouldn’t bother with an accountant as the self assessment is all pretty straightforward as long as you keep accurate and detailed records of all your ins and outs. It’s up to you though. I just empty out a big box full of paperwork on the floor on January the 31st, crack open the scotch… and let the good times roll.
you do it all in one go at the end of the year? Cripes. lol No wonder you need the scotch haha
I just empty out a big box full of paperwork on the floor on January the 31st, crack open the scotch… and let the good times roll.
Drunk tax return filing a few hours before the deadline and the dreaded £100 fine!
Now there’s an Olympic sport if ever I heard one. Good show chap.