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).
When Should You Register with HMRC as a Self Employed Blogger?
You must register with HMRC as self employed as soon as possible after starting work your blog or have decided that it is more than just a hobby, but HMRC rules are that you must register by 5 October in your business’ second tax year.
However if you are newly self employed and expect that your gross income will be less than £1,000 in your first year, you may be entitled to the £1,000 Annual Tax Allowance for traders meaning you don’t need to register and declare your income. Check the criteria to understand your eligibility and whether this allowance is the most tax efficient solution for you here.
How to 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.