Do what you love and you will never work a day in your life.
Unfortunately the taxman may disagree and as much as you feel your blogging is your passion, HMRC may consider your blog a business which means you could need to pay tax. So here is some tax advice especially for bloggers to help:
- Work out whether you need to pay tax;
- Understand what tax you will need to pay and help you to estimate how much;
- Learn more about your tax responsibilities as a blogger.
Hobby or Business?
Just to be clear anyone in business or earning income probably needs to let HMRC know what they are earning and pay tax on it. That’s just a fact of life.
However there are many bloggers out there who simply do it as a hobby. It may just be a creative outlet on the side of their full time job or they use it as a type of diary. It’s a hobby, just like how someone else may play golf or go cycling, so in this case there is no need to let HMRC know and there are no tax implications to worry about.
If you are struggling to identify whether your blog is a hobby or a business, then here are some questions you can ask yourself to decide:
What is Your Motivation?
Are you hoping to turn your blog into a full time job one day and as such are gearing up for your blog to to generate income?
Do You Have Ad Space?
Even if you haven’t sold any space, are you intending to sell ad space or have you already implemented something like Adsense, for example?
Have you accepted Products in return for your writing?
You may not have accepted any cash but have/would you accept products in return for writing a blog on your site?
Do you do Guest Blogging to raise awareness?
Are you guest blogging on other sites to raise your profile, increase traffic and promote your brand?
If you answered yes to any of these, then it is likely that you are in business and will have some tax obligations. However if you remain unsure then you should seek a professionals advice because there are penalties for businesses that fail to report to HMRC.
Blogging as a Business
The simplest way to let HMRC know you are in business is to register yourself as Self Employed and report your earnings on a Self Assessment Tax Return.
The Four Essentials of Self Employment:
- Visit the HMRC website and register as Self Employed;
- List out and keep all the receipts from your blogging income and expenses;
- Complete a Self Assessment Tax Return before 31 January each year summarising your business income and expenses;
- Pay any Tax and National Insurance due by 31 January each year (and payments on account by 31 January and 31 July each year).
Register as Self Employed Online with HMRC
You can register online as Self Employed on the HMRC website. The process can take 10 days to complete upon which HMRC will post you a UTR number (Unique Taxpayers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.
Your Responsibilities as a Self Employed Blogger
Self Employed Individuals are responsible for reporting their income to HMRC under Self Assessment by submitting a personal Tax Return by 31 January each year detailing your income as a blogger, income tax and national Insurance due, as well as paying any tax you owe.
Your tax return submitted by 31 January covers the previous tax year (a tax year runs from 6 April to 5 April). So for example, your tax return due by 31 January 2018 details your earnings between 6 April 2016 to 5 April 2017 from your blogging as well as any other income you have (such as employment income, rental income, bank interest or dividends).
Payments On Account
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years income tax bill and class 4 national insurance bill, so make sure you budget for this additional payment too.
If you already Submit a Tax Return
It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CWF1 to notify HMRC that you have a new form of income (in this case self employment) that you need to report to them on. Again, you can do this online here and you will need your Unique Taxpayers Reference.
How to Work Out Your Earnings as a Blogger
When you are self employed the tax you pay is based on the income you make from blogging. Confusingly, income actually means profit – all the money you make less all the costs you have incurred.
Self Employed Blogging Income
As a blogger you may accept gifts or products in exchange for writing about a product and it is really important to know that this counts as income. HMRC states that these types of bartering transactions must be valued at market rate and included as part of income.
Other types of income bloggers may receive are from things like:
- Affiliate marketing
- Guest blogging
- Subscription services
Allowable Blogging Expenses
When you are self employed it is really important to understand which are allowable as they reduce the amount of tax you have to pay.
Generally speaking most things you pay for as part of your blogging will be allowable, here are some examples:
Computer & Printer
Your computer and printer will be tax allowable so make a note and keep the receipt to discuss at tax time.
It is a common something you have something, like a laptop, that you use for business and personal. In these types of cases HMRC allows you to only claim for the portion of the item being used for the business. So if for example you use your laptop 60% of the time for blogging and the other 40% for personal things like internet shopping, facebook etc then you would only be able to claim for 60% of the cost of the laptop against your taxes
Website and Hosting
Any costs you pay for designing and building your website are an allowable business expense as well as ongoing costs for hosting and maintenance.
Licences, Software, Subscriptions
Managing your site, traffic and growing your brand comes with costs such as shutterstock, hootsuite or mailchimp. Against these are all allowable costs.
Telephone and Internet
The cost of a business phone (mobile and/or landline) and your internet is an allowable expense however if there is personal use then only a proportion of the contract costs can be claimed.
If you need to travel around you will incur costs. Keep hold of your receipts for trains, tubes or taxis as they should all be allowable expenses and help reduce your tax bill.
If you need to use your car to travel around then you should note down the mileage as this falls under the category of travel. Record your miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.
Note – If you choose to rent a desk or office space you may not be able to claim for the cost of travel/mileage as this may represent your permanent place of work. Make sure you take professional advice before claiming for travel/mileage as incorrect claims can result in penalties.
If you opt to rent a desk or an office, then again the cost of doing so is an allowable expense and will reduce your taxable income.
Use of Home
If you choose to work from home then there are rules that will allow you to claim an amount for the running costs of doing so from your home as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.
Alternatively, HMRC allows you to claim a flat rate of £4 per week for using your home for work purposes and you don’t need to substantiate this claim with receipts.
Wages and Freelancers
If you need some assistance and support from others then the cost of these individuals will be tax allowable since they are an incidental cost of your blog.
Any marketing you do (online or offline), paid ads or anyone you pay to help you with your marketing is also fully allowable so make sure you download or ask your marketing assistant to send you an invoice before you pay them.
Accounting & Bookkeeping
If you choose to use an accountant to complete your self assessment tax return again their fees will be an allowable expense. Keeping accurate records will definitely help keep their fees down too as well as giving them all the information they need to make sure you receive all the deductions and reliefs to reduce your tax liability.
It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account is an allowable expense.
All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. It is also really important to be aware of which expenses are allowable for your business because incorrect claims can result in penalties. If you are unsure, always seek the help of a professional.
Top Tax Tip:
Even if you are currently not making any money blogging, you must still register with HMRC and complete a tax return. Although this may feel onerous, completing a tax return means you can record all your expenses to create a tax loss. This can then be used against any money you make in the future and save you tax at this point.
How Much Tax Will You Pay
As you now know the amount of tax you pay is based on the profit you make from blogging (all your income less all your allowable expenses).
However the amount of tax that you actually pay is based on your circumstances and how much you earn in total during a tax year.
Income tax is calculated at different rates according to how much your profits are. So for 2017/2018 the rates are:
|Personal Allowance||0%||Up to £11,500||Up to £11,000|
|Basic rate||20%||£11,501 to £45,000||£11,001 to £43,000|
|Higher rate||40%||£45,001 to £150,000||£43,001 to £150,000|
|Additional rate||45%||over £150,000||over £150,000|
Example of Working Out Tax for a Blogger
Molly is a food blogger. She is getting ready to submit her tax return for the tax year 2016/2017 which is due by 31 January 2018. She has worked out that her profit from blogging was £22,000 therefore she will need to pay tax of £2,200.
What Other Tax Must a Self Employed Blogger Pay?
Self employed bloggers may need to pay Class 2 and Class 4 National Insurance as well as tax. The amount of Class 4 National Insurance you pay is based on your blogging profits. The current rates are:
|Class||Rates for tax year 2017/2018||Rates for tax year 2016/2017|
|Class 2||£2.85 a week
On taxable profits above £6,025
|£2.80 a week
On taxable profits above £5,965
|Class 4||9% on profits between £8,164 and £45,000
2% on profits over £45,000
|9% on profits between £8,060 and £43,000
2% on profits over £43,000
In our example above, Molly earned £22,000 therefore would need to pay Class 2 National Insurance of £145.60 and Class 4 National Insurance of £1,254.60.
Molly’s total tax bill is therefore:
- Income tax £2,200.00
- Class 1 National Insurance £145.60
- Class 2 National Insurance £1,254.60
- Total for 2016/2017 £3,600.20
- Payment on Account £1,727.30
- Total to pay by 31 January 2018 £5,327.50
Whether you are already a sole trader or if you are considering becoming a sole trader it is important to budget for your tax and national insurance bill, one of the simplest ways is to set some money aside for HMRC as you get paid. If you are unsure how much tax you need to pay or of your tax status we definitely recommend you ask an accountant.
What About VAT? VAT affects all businesses, find out whether Bloggers need to be registered for VAT here.