A lot of people have been asking me about whether they need to declare their extra income to HMRC, being worried about tax avoidance, and if so, what needs to be declared. Unless you're only selling your unwanted items on eBay, then you need to be declaring your extra income. This includes but is not limited to online surveys, sponsored blog posts, mystery shopping, smart phone app earnings and more. Even if you're working full time and paying tax through PAYE, you still must declare your extra income. The whole process of registering as self employed and then completing a self assessment each year only takes a few hours.
Of course, every blogger or eBayer doesn't have to register. If you're blogging but not getting any income from it, and if you're just selling your unwanted items on eBay, you won't need to register. But once you've accepted payment from your blog, or sold something on eBay that you specifically bought to sell, you're going to want to go ahead and register for self-assessment. You must have registered by 5th October after the end of the tax year you need to complete a tax return for. So that means if you've made some extra income between 6th April 2013 and 5 April 2014, you must register by 5 October 2014. You can register late, but you may face a penalty fine. You must then complete your self-assessment and pay any taxes owed by January 2015, so as you can see, you have plenty of time to get this all sorted, and know exactly how much you earned and how much you can offset.
How much are you going to have to pay out in National Insurance and tax? Here is a brilliant calculator that allows you to put in both your employed and self-employed earnings. So, for example, if you were earning £15,000 a year from your “proper” job, and £200 a month online (with no expenses), after tax and National Insurance you will actually be taking home £148.08 from that £200 extra you're making each month.
To register, simply go here to the HMRC website and register your business as self-employed – don't be scared by the use of the title “business”, you can apply as an individual earning some extra money. Be sure to read through carefully and answer all the questions. Once you've registered you will receive your Unique Taxpayer Reference, which you can use to register to complete your self-assessments online. Once received, go here to the HMRC self-assessment home page and on the right-hand side and select “sign up for self-assessment online” and follow the process.
The HMRC site is a bit of a minefield, unfortunately. But for starting out, be sure to check out their information page about Undeclared Income. If you do get stuck then they have a very helpful, free phone call center number, where someone is on hand to answer your questions. The number is 0300 200 3310.
HMRC can take the tax in two ways – you can either have your tax code from your main job changed, so that you're taxed through that, or you can opt to pay it yourself when the bill comes in. Personally, I prefer the second option, keeping the tax I owe away from my personal income.
Remember that you can offset most expenses that you have incurred, so for example, web hosting costs, or even petrol to boot sales where you've purchased items to sell on. I can strongly recommend using Google Drive/Google Docs to create a spreadsheet of all your income and outgoings related to earning extra income. This will help you to complete your self-assessment much more easily.
If you have any further questions then feel free to ask them in the comments. I'm no accountant, but if I can't help you then I'll try to steer you in the right direction.
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