It’s coming up to that time of year again… no, not Christmas, but the other time of year that all self-employed people start freaking out about… tax return time! OK, not everyone freaks out as some of us do our tax returns as soon as we can, like in April! I’ve always wondered why people put it off until the very last minute.
The only thing I’m freaking out about is remembering to pay my bill! I have several alarms at the ready near the end of January. I have the money sat waiting to pay it and just need to log in to make my payment. I did actually pay it right away, but it just sat there in my tax account doing nothing, so I thought it better to earn interest on it until the due date if they’re not going to actually deduct it from my tax bill until 31st January. I had it refunded and it’s been sat patiently waiting until the end of Jan whilst nicely earning a bit of interest (which of course I will declare on my next tax bill!)
Many bloggers find the whole tax thing really scary and intimidating. I’m here to tell you it’s not at all. I am by no means an expert, but I want to share with you a few tips and some handy links to get you started. I should probably mention at this stage I do love spreadsheets and form filling doesn’t faze me, so maybe that’s why I find it OK. I get not everyone is like this though, but hopefully you won’t find it scary and if you do then seek professional advice.
Things to note – I am not an expert, so please do your own research. I’ll share some links here. Also, tax rules change all the time and I am writing this in November 2018 so do check the links and investigate for yourself as allowances and rules can change each new tax year.
Keep records of everything
Firstly, if you are planning on running your blog as a business then you need to keep records of everything. Even if you are only going to make £10 from your blog this year, that’s a profit and an income and it makes your blog a business. You might not have to register for self-assessment with such a small income from your blog (see next point), but you still need to keep records. There’s a chance your blog will make enough over the next few months to have to register as self-employed, so it’s best to keep on top of record keeping.
Keep all invoices, receipts, bank statements and email correspondence with customers. I keep a spreadsheet with all my incomings and outgoings which I update every day as and when I have an incoming or expense. I then cross reference this with my bank account and PayPal every week and ensure the balances match up. I have a separate spreadsheet for each tax year. I rarely have paper receipts, but when I do I keep these in an envelope for each tax year. Many of my invoices and receipts are electronic so I keep them in my email account all sorted into ‘incomings’ and ‘outgoings’ for each tax year. I can easily print everything and find records of everything for each tax year.
You really need to come up with an organised system to keep records of everything and stay on top of it so it doesn’t overwhelm you.
The HMRC website says “examples of the records you may need to keep are:
- copies of your invoices, paper or electronic
- a spreadsheet of your income receipts
- emails confirming income received
- statements from the company who paid you which show the amount you received
- bank statements
- bank deposit pay-in records
- a diary or appointments book showing your income from each customer
HMRC can charge you a penalty if the records you keep aren’t accurate, complete and readable or if you don’t retain them for the required period of time.”
I must admit, I love spreadsheets. I love adding formulas that work out all my tax payments and national insurance contributions and automatically update as I add new figures every day. Some people loathe spreadsheets though or they simply don’t get them and get into a muddle. Just because I use a spreadsheet, it doesn’t mean you have to, but you have to have some way of recording every incoming and outgoing each month. If you’re making enough money or as your blogging business grows then you may wish to consider hiring an accountant to manage your tax returns or using some digital software to make everything easier. I’ve heard many bloggers talk about using Quickbooks before to make accounting and invoicing simplified and of course, digital. Digital tax accounting company Tax Kings also offer digital bookkeeping services for sole traders including ‘preparing, recording and completing your annual return’.
If your gross income is £1000 or less, you don’t have to register with HMRC
If your gross trading income from one or more self-employment trades is £1000 or less then you don’t have to tell HMRC or register as self-employed. That means your total income before any expenses. It’s known as a trading allowance. If you don’t make much money from blogging (under £1000) and you have no other trades then it can save the hassle of doing a self-assessment.
However, there are some reasons why you may wish to complete a self-assessment, even if you earn under £1000 from blogging and any other trades. These include if you’ll want to claim Maternity Allowance based on your self-employed income, if you want to claim Tax Free Childcare based on your self-employed income and if you want to voluntarily pay Class 2 National Insurance contributions to help towards some benefits.
You can find out more information here: https://www.gov.uk/guidance/tax-free-allowances-on-property-and-trading-income
Register for self-assessment if your income is over £1000
If your gross (before expenses) income from blogging and any other trades is over £1000 then you’ll have to register for self-assessment with HMRC. Even if your income from blogging is under £1000 then are some circumstances mentioned above where it could benefit you to register anyway.
You can register for self-assessment here: https://www.gov.uk/log-in-file-self-assessment-tax-return
Use ‘simplified expenses’ to claim for utilities
If you work from home then a proportion of the energy bills will be during the hours you are working. Instead of trying to break down exactly how much gas, electric and water you used during working hours to claim as an expense, you simply use the ‘simplified expenses’ flat rate which tells you exactly how much you can claim as an expense each month:
Hours of business use per month
Flat rate per month
25 to 50
51 to 100
101 and more
Click this link to find out more: https://www.gov.uk/simpler-income-tax-simplified-expenses/working-from-home
I work anywhere from 30-50 hours per week on my at-home business so I can add £26 per month as an expense towards our utility bills.
Note – this doesn’t include telephone or internet bills, so these need to be worked out and claimed as a separate expense.
Save as you go
This is probably one of the most important things to do! Save your tax as you go! As mentioned, on my spreadsheet I have formulas that are linked to my profits each tax year that work out my total costs for the following:
- Tax (20% of income over my £11850 personal allowance)
- Class 2 NIC (set amount £153.40)
- Class 4 NIC (9% of profits between £8424 and £46350)
- Student Loan Plan 1 (9% of income over my £18330 personal allowance)
So by the end of the tax year I already know exactly how much I owe thanks to my spreadsheet. I save throughout the year though by putting £500 a month to one side – a savings account – so I have the money ready to pay the tax bill at the end of the year. Anything left over, £2000ish, will go in my pension pot.
I know roughly what I’ll earn now as I’ve been full-time blogging for a while, but if you’ve no clue how much all your outgoings are then search Google for a ‘self-employed tax calculator UK’ where you can enter your monthly income and it will tell you how much tax and expenditure for student loans, etc, you’ll have to pay on that. Then you can put this amount to one side and do the same the next month. This might be a handy way of doing things if your income really fluctuates each month. If you save too much then just see it as savings! Better to save too much rather than too little or nothing at all! You want to be prepared and all saved up for your tax bill at the end of the year.
I’ve no idea of the accuracy, but this looks like quite a good calculator: https://www.employedandselfemployed.co.uk/tax-calculator
Hopefully these 6 tips have been useful. By no means is this a definitive guide! There is so much more I could say, but this is a good starting point. You’ll also need proof and amounts of any interest earned on savings for the year, dividends earned and other income such as from an employed job. Basically, just keep records of all monetary income or make sure you have digital access to them as proof and for filling out your tax return when the time comes. The HMRC website really is so helpful and full of so many guides to help you or you can always choose to seek professional advice or hire an accountant to make the whole process as easy as possible.
Helpful articles if you want to monetise your blog:
6 secrets to make more money from your blog
Make money from your blog with Awin affiliate marketing
Make money from your blog without Google ads
4 ways to find paid blog opportunities
How I save hours every week scheduling tweets with Social Oomph
How to improve your domain authority (DA)
Work from home blog posts:
The 5 ways I made £30000 money from home in 2017/2018
5 tried and tested ways to make money as a UK stay at home mum
How to deal with overwhelm as a work at home parent
How to survive the half term when you work from home
5 tips to stay healthy if you work from home