Michael
I Love YTtalk
If you are a YouTuber and you monetize your videos either via Adsense or as a partner in a YouTube network your earnings are taxable in the UK and all money made via your channel once it reaches your bank or PayPal you are liable to pay tax on whether it is £2, £200 or £2000. Not the best of news but at least I can help you get your head around it.
Taxes are never simple as they should or could be unfortunately and being a YouTuber earning money means you need to start to learn how to do your own taxes especially if you cannot afford or do not want an accountant. Don't delay in learning this as learning it early on as possible makes things easier down the road and you're a smart one I know it.
This guide is all based off what I know and should not be taken as legal advice and if in doubt you should hire an accountant to help with your tax affairs. Whilst my advice is sound you should consult a professional who deals with taxes in the UK.
I will take you from start to finish of your first tax year and explain as much as I can, there are many things I didn't know about and I will try and make it as simple as I can for you.
Registering As Self Employed For Self Assessment
When you open business ie start earning from YouTube which is the second that money from Adsense or a network lands into an account you have access to you must file for Self Assessment. The date this money enters an account you can access you are considered to be trading/earning.
Self assessment describes exactly what it is, you assess your earnings for tax yourself and must keep records of all incomings and outgoings and at the end of the tax year file a tax return which is where you send HMRC details of your income and outgoings so they can calculate how much tax you owe.
To a YouTuber this may seem very in depth or even over the top for a simple hobby but it is necessary to stay within the law and to ensure that you do things properly as you don't want trouble for yourself later on.
Your main requirements when making money are the following:
Keep records of income -YouTube earnings and all earnings that are generate from your channel/business. This could be any money from Adsense from your channel related websites too.
Keep records of allowable expenses and outgoings - Receipts kept for all business related purchases including ones bought for part personal/part business use, records of any costs associated with
File for Self Assessment with HMRC - https://online.hmrc.gov.uk/registration/
Do not file for this late as there are penalties if you dont.
Submit Your Tax Return - You will submit your tax return once per year. If you start “trading” on the 10th of April 2014 you will submit your tax return quite a while after, assuming your accounting date (the date your tax year starts - you choose this yourself but April 5th is easiest since it is that for most people) is April 5th, you will keep records constantly from then on and submit a tax return for the year 2014-2015 between April 5th 2015 and the 31st of January 2016.
Pay your taxes on time - As a self employed sole trader you will likely pay a few taxes depending on your earnings, ensure these are paid on time to avoid trouble with HMRC and fines/penalties.
Once you are registered for self assessment you will receive more documents in the post detailing your UTR code (Unique Tax Payer Reference) and how to get onto their tax filing systems, make sure to keep all documents sent to you from HMRC safe.
Keeping Records and Accounts
When you start making money from your videos you are required to keep a good records of accounts, for many this means seriously brushing up on their bookkeeping skills or learning it from scratch.
A basic set of accounts for a self employed sole trader can include the following:
Income/Sales - Adsense, Network Payments via PayPal etc
Outgoings/Purchases/Expenses - Money spent on expenses for your channel such as recording equipment.
For more details on record keeping see here - http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm#4
To keep them you can use a simple spreadsheet in Microsoft Excel, have a sheet for income and sales and a sheet for purchases/outgoings.
Within the sales sheet have an identifying column at the start for example S1 means Sale 1, next to that have a column for details about the income for example who paid it to you for example Adsense Revenue or XYZ network and next to that the amount you received.
In your outgoings sheet you can have a similar format listing those you paid out to, how much it was and what the cost was for, for example E1 (expense 1)>Panamoz Camera Shop>Canon Lens For Filming>£100.
You can keep these records in a cheap notepad and do it just the same but I find that using Excel is preferable these days as you can make changes to mistakes more easily and backups.
In addition to your accounts make sure to keep receipts for every sale and write the identifying number on each receipt to keep your own organised filing system in case you need to find a receipt in the future. By law you must keep these records for five years after the years records have been filed. Keeping a backup of these records is extremely important. If you have a file/folder I recommend using it to keep your receipts in top condition as receipts tend to get mislaid or dirty easily over time.
Keep in mind that all expenses that are wholly incurred for business use are “allowable” expenses that you can claim tax relief on. For example if you pay for a website each month and have hosting costs these are fully allowable expenses, as are advertising costs if you use Google Adwords to promote your videos.
You can also claim a portion of your rent, council tax, electricity and gas costs and get relief on those expenses if you use part of your home for doing business ie your videos but these are not fully allowable expenses as they are part personal expense and part business.
Not all expenses are allowable however, to see what is and isn't take a look here:
http://www.hmrc.gov.uk/incometax/relief-self-emp.htm
The Kinds of Taxes
Depending on your earnings you will pay differing kinds of tax.
Class 2 National Insurance Contributions
Once you are registered for self assessment you are usually liable to pay Class 2 National Insurance Contributions, these are payable once monthly or every 6 months at the current rate of £2.75 per week.
You are liable to pay these if your earnings are above £5,885 per year, if you don't make that per year you can claim an exception and get yourself a certificate of small earnings to exempt you from paying these. For more information on exemptions see here:
http://www.hmrc.gov.uk/working/intro/class2.htm#5
These need to be paid whether you may a load one week and nothing the next.
Basic Rate Income Tax
Income tax is paid on all taxable earnings which include -
This is paid by the 31st of January when your tax is due, if you filed a tax return in June 2014 for the tax year 2013-2014 you will need to pay the tax owed for that year by 31st of January 2015 in full.
The basic rate is currently 20% for earnings between £0 - £32,010, if you earn between £32,011 - £150,000 it is 40% and 50% for earnings over £150,000. These figures change and you can stay up to date here:
http://www.hmrc.gov.uk/rates/it.htm
Class 4 National Insurance Contributions
If you earn over a certain amount you must pay Class 4 National Insurance Contributions, in the tax year 2014-2015 if you earn profits between £7,956 and £41,865 the rate is 9%, for earnings higher than that it is an additional 2%. So if you make less than £7956 in profits you don't owe it, Class 4 NICs are worked out when filing your tax return online.
Personal Allowance
In the UK you are entitled to a £10,000 personal allowance for the tax year 2014-2015, this means you are entitled to receive this amount each year and not be taxed on it, please see here for more information as the personal allowance changes yearly:
http://www.hmrc.gov.uk/incometax/personal-allow.htm
Working Out Your Taxes
The best way to keep your taxes in check is good record keeping, keeping all receipts for purchases and expenses and filing for self assessment as soon as you make money from your channel. To work out your taxes at the end of the year I recommend adding up all the income from your channel for the year, writing that number down, now write down the total of all of you fully allowable expenses.
Once you have those totals you can begin working out your part personal and business expenses. This could be broadband costs for example, say you spent £1200 a year on a broadband only package which you use 50% of the time to work on your channel and upload videos from you can claim tax relief for 50% of the amount you spent on it. You can also work out partial rent costs in similar ways, for example, rooms used is one room out of 6 in the whole house, ⅙ of the rent equals £200, you use the room 50% of the time for video creation which would be half of the £200 letting you claim for £100 for rent costs. You can do the same with electricity costs for powering your computer when editing videos etc. To really get the most for yourself out of this consult an accountant as they can help you figure out what you should be claiming relief on and work it for you.
Delaying Adsense Payments and Earnings
There are many people who are just not ready to be working out taxes or getting their money from their videos but still would like to accrue and grow their earnings without having to deal with taxes, well you are in luck. As long as your earnings do not enter your bank account or PayPal you do not need to pay tax on them immediately, you are also not considered self employed nor do you need to register for self assessment until you get your first payment.
To stop your Adsense earnings in your Adsense account go to this link which is your Payments Settings page:
https://www.google.com/adsense/app#payments3/h=ACCOUNT_SETTINGS
Click on Configure and then configure your payment hold. This method will work for 1 year, you cannot set it for longer than a year but it can give you some time if receiving money from Adsense is not preferable for you.
Filing Your Return
Filing your first tax return can be a daunting task but try and be calm throughout the process and it will go smoothly.
Tax returns must be filed by the 31st of January if filing online and much earlier if filing by post. Most people these days tend to file theirs online as you can made amendments to it easily and it is much easier.
You must file one even if you do not need to pay tax, if you earn only £2 in the tax year you must still file a tax return.
To start filing your self assessment tax return you can visit here and log in with the details you get from HMRC:
https://online.hmrc.gov.uk/self-assessment/
Once you have your tax return filed you will find out the totals you will have to pay. To get a look at what you will be looking to pay earlier in the year or at any other time I recommend this tax calculator tool, it works very well for self employed sole traders:
http://www.uktaxcalculators.co.uk/
I hope that this guide helps some of you understand more about taxes in the UK and what you need or dont need to pay as a YouTuber who monetizes their videos. If you have any questions I will do my best to answer and help you but I am not an accountant nor a professional when it comes to tax affairs so I wont be able to answer every question about every conceivable circumstance
most of this is information I have learned from looking at the HMRC website myself and various business related websites.
Thank you for reading and I hope this helps!
Resources:
HMRC Self Employed Information
http://www.hmrc.gov.uk/selfemployed/
HMRC Tax Returns Information
http://www.hmrc.gov.uk/sa/self-emp.htm
Taxes are never simple as they should or could be unfortunately and being a YouTuber earning money means you need to start to learn how to do your own taxes especially if you cannot afford or do not want an accountant. Don't delay in learning this as learning it early on as possible makes things easier down the road and you're a smart one I know it.
This guide is all based off what I know and should not be taken as legal advice and if in doubt you should hire an accountant to help with your tax affairs. Whilst my advice is sound you should consult a professional who deals with taxes in the UK.
I will take you from start to finish of your first tax year and explain as much as I can, there are many things I didn't know about and I will try and make it as simple as I can for you.
Registering As Self Employed For Self Assessment
When you open business ie start earning from YouTube which is the second that money from Adsense or a network lands into an account you have access to you must file for Self Assessment. The date this money enters an account you can access you are considered to be trading/earning.
Self assessment describes exactly what it is, you assess your earnings for tax yourself and must keep records of all incomings and outgoings and at the end of the tax year file a tax return which is where you send HMRC details of your income and outgoings so they can calculate how much tax you owe.
To a YouTuber this may seem very in depth or even over the top for a simple hobby but it is necessary to stay within the law and to ensure that you do things properly as you don't want trouble for yourself later on.
Your main requirements when making money are the following:
Keep records of income -YouTube earnings and all earnings that are generate from your channel/business. This could be any money from Adsense from your channel related websites too.
Keep records of allowable expenses and outgoings - Receipts kept for all business related purchases including ones bought for part personal/part business use, records of any costs associated with
File for Self Assessment with HMRC - https://online.hmrc.gov.uk/registration/
Do not file for this late as there are penalties if you dont.
Submit Your Tax Return - You will submit your tax return once per year. If you start “trading” on the 10th of April 2014 you will submit your tax return quite a while after, assuming your accounting date (the date your tax year starts - you choose this yourself but April 5th is easiest since it is that for most people) is April 5th, you will keep records constantly from then on and submit a tax return for the year 2014-2015 between April 5th 2015 and the 31st of January 2016.
Pay your taxes on time - As a self employed sole trader you will likely pay a few taxes depending on your earnings, ensure these are paid on time to avoid trouble with HMRC and fines/penalties.
Once you are registered for self assessment you will receive more documents in the post detailing your UTR code (Unique Tax Payer Reference) and how to get onto their tax filing systems, make sure to keep all documents sent to you from HMRC safe.
Keeping Records and Accounts
When you start making money from your videos you are required to keep a good records of accounts, for many this means seriously brushing up on their bookkeeping skills or learning it from scratch.
A basic set of accounts for a self employed sole trader can include the following:
Income/Sales - Adsense, Network Payments via PayPal etc
Outgoings/Purchases/Expenses - Money spent on expenses for your channel such as recording equipment.
For more details on record keeping see here - http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm#4
To keep them you can use a simple spreadsheet in Microsoft Excel, have a sheet for income and sales and a sheet for purchases/outgoings.
Within the sales sheet have an identifying column at the start for example S1 means Sale 1, next to that have a column for details about the income for example who paid it to you for example Adsense Revenue or XYZ network and next to that the amount you received.
In your outgoings sheet you can have a similar format listing those you paid out to, how much it was and what the cost was for, for example E1 (expense 1)>Panamoz Camera Shop>Canon Lens For Filming>£100.
You can keep these records in a cheap notepad and do it just the same but I find that using Excel is preferable these days as you can make changes to mistakes more easily and backups.
In addition to your accounts make sure to keep receipts for every sale and write the identifying number on each receipt to keep your own organised filing system in case you need to find a receipt in the future. By law you must keep these records for five years after the years records have been filed. Keeping a backup of these records is extremely important. If you have a file/folder I recommend using it to keep your receipts in top condition as receipts tend to get mislaid or dirty easily over time.
Keep in mind that all expenses that are wholly incurred for business use are “allowable” expenses that you can claim tax relief on. For example if you pay for a website each month and have hosting costs these are fully allowable expenses, as are advertising costs if you use Google Adwords to promote your videos.
You can also claim a portion of your rent, council tax, electricity and gas costs and get relief on those expenses if you use part of your home for doing business ie your videos but these are not fully allowable expenses as they are part personal expense and part business.
Not all expenses are allowable however, to see what is and isn't take a look here:
http://www.hmrc.gov.uk/incometax/relief-self-emp.htm
The Kinds of Taxes
Depending on your earnings you will pay differing kinds of tax.
Class 2 National Insurance Contributions
Once you are registered for self assessment you are usually liable to pay Class 2 National Insurance Contributions, these are payable once monthly or every 6 months at the current rate of £2.75 per week.
You are liable to pay these if your earnings are above £5,885 per year, if you don't make that per year you can claim an exception and get yourself a certificate of small earnings to exempt you from paying these. For more information on exemptions see here:
http://www.hmrc.gov.uk/working/intro/class2.htm#5
These need to be paid whether you may a load one week and nothing the next.
Basic Rate Income Tax
Income tax is paid on all taxable earnings which include -
This is paid by the 31st of January when your tax is due, if you filed a tax return in June 2014 for the tax year 2013-2014 you will need to pay the tax owed for that year by 31st of January 2015 in full.
The basic rate is currently 20% for earnings between £0 - £32,010, if you earn between £32,011 - £150,000 it is 40% and 50% for earnings over £150,000. These figures change and you can stay up to date here:
http://www.hmrc.gov.uk/rates/it.htm
Class 4 National Insurance Contributions
If you earn over a certain amount you must pay Class 4 National Insurance Contributions, in the tax year 2014-2015 if you earn profits between £7,956 and £41,865 the rate is 9%, for earnings higher than that it is an additional 2%. So if you make less than £7956 in profits you don't owe it, Class 4 NICs are worked out when filing your tax return online.
Personal Allowance
In the UK you are entitled to a £10,000 personal allowance for the tax year 2014-2015, this means you are entitled to receive this amount each year and not be taxed on it, please see here for more information as the personal allowance changes yearly:
http://www.hmrc.gov.uk/incometax/personal-allow.htm
Working Out Your Taxes
The best way to keep your taxes in check is good record keeping, keeping all receipts for purchases and expenses and filing for self assessment as soon as you make money from your channel. To work out your taxes at the end of the year I recommend adding up all the income from your channel for the year, writing that number down, now write down the total of all of you fully allowable expenses.
Once you have those totals you can begin working out your part personal and business expenses. This could be broadband costs for example, say you spent £1200 a year on a broadband only package which you use 50% of the time to work on your channel and upload videos from you can claim tax relief for 50% of the amount you spent on it. You can also work out partial rent costs in similar ways, for example, rooms used is one room out of 6 in the whole house, ⅙ of the rent equals £200, you use the room 50% of the time for video creation which would be half of the £200 letting you claim for £100 for rent costs. You can do the same with electricity costs for powering your computer when editing videos etc. To really get the most for yourself out of this consult an accountant as they can help you figure out what you should be claiming relief on and work it for you.
Delaying Adsense Payments and Earnings
There are many people who are just not ready to be working out taxes or getting their money from their videos but still would like to accrue and grow their earnings without having to deal with taxes, well you are in luck. As long as your earnings do not enter your bank account or PayPal you do not need to pay tax on them immediately, you are also not considered self employed nor do you need to register for self assessment until you get your first payment.
To stop your Adsense earnings in your Adsense account go to this link which is your Payments Settings page:
https://www.google.com/adsense/app#payments3/h=ACCOUNT_SETTINGS
Click on Configure and then configure your payment hold. This method will work for 1 year, you cannot set it for longer than a year but it can give you some time if receiving money from Adsense is not preferable for you.
Filing Your Return
Filing your first tax return can be a daunting task but try and be calm throughout the process and it will go smoothly.
Tax returns must be filed by the 31st of January if filing online and much earlier if filing by post. Most people these days tend to file theirs online as you can made amendments to it easily and it is much easier.
You must file one even if you do not need to pay tax, if you earn only £2 in the tax year you must still file a tax return.
To start filing your self assessment tax return you can visit here and log in with the details you get from HMRC:
https://online.hmrc.gov.uk/self-assessment/
Once you have your tax return filed you will find out the totals you will have to pay. To get a look at what you will be looking to pay earlier in the year or at any other time I recommend this tax calculator tool, it works very well for self employed sole traders:
http://www.uktaxcalculators.co.uk/
I hope that this guide helps some of you understand more about taxes in the UK and what you need or dont need to pay as a YouTuber who monetizes their videos. If you have any questions I will do my best to answer and help you but I am not an accountant nor a professional when it comes to tax affairs so I wont be able to answer every question about every conceivable circumstance
most of this is information I have learned from looking at the HMRC website myself and various business related websites.Thank you for reading and I hope this helps!
Resources:
HMRC Self Employed Information
http://www.hmrc.gov.uk/selfemployed/
HMRC Tax Returns Information
http://www.hmrc.gov.uk/sa/self-emp.htm
