Income tax question

[andymc]

I live in the UK

I have a full time job where I pay tax and NI through the normal PAYEE system

I am starting to earn money through ads in my android apps

I understnad I need to declare the income from these as taxable, but if I buy things to aid in dev work, can I save tax on these?

So say I make £10,000, then spend £3000 on a new PC, laptop and phone. Do I then just declare £7000 as taxable and pay on that?

And what classes as costs? I assume my web domain costs, B4A licence, PC and phone bill costs would all count.

 

[MikeH]

Yes, the online tax return form is quite easy to fill out. I did it this year for the first time, during my 1st year of business. You will see boxes for expenses and income. At the end you'll see the amount left and the amount you have to pay. I think the threshold is £10,700 so you may not have to pay anything. The things you list, in my opinion, are tax deductable - all the same Id list them as expenses anyway. The worst they'll do is correct you.

p.s. also add something for heating, lighting, travel costs - anything you wouldnt do if it wasnt for your job. Even eating out if you are visiting a client. You can also put work clothes down and laundry expense. Keep all receipts.

 

[sorex]

In Belgium you can only declare expenses for tax deduction if you have a "company number" this can be a secondary job, freelancer or a real company.
Not in your personal income tax forms.

So you might need to register yourself as secondary job "company" where your main work is still using most of the hours.
If not some costs might increase a lot (see * below)

hosting, telephone, internet, licenses, hardware related to your (second) job etc can be added to recover taxes.

In most cases when you buy stuff abroad and hand over your company number they don't add the taxrate at all.
(tax free traffic between euro zone companies)

so it has benefits BUT also disadvantages.

you need to pay a certain amount each quarter for social stuff.

overhere this is the first year a guessed value and later based on your income or profit.

(*) in my case that's about €80/quarter as I don't have much income. for a real full time pro this is 700+.

if your ads is only earning a few hundreds a year you could add it to your personal tax form as extra income (or don't register it at all).
overhere half of that values gets taxated again.

last week I was reading about this topic and saw some articles where the belgian tax people forced a blogger
to become a real company because he added his (too much?) adsense income to his personal taxes.

it seems that they are hunting down people who earn via ad programs as this is for some people a lot more than their "real" income
and they might lose too much on it compared to the full company taxing.

 

[warwound]

So say I make £10,000, then spend £3000 on a new PC, laptop and phone. Do I then just declare £7000 as taxable and pay on that?

Claiming expenses in the UK as a self employed person isn't as generous as it used to be.
Is that new PC used exclusively for your self employment or is it used for personal uses too?
Ditto that new laptop and phone.
Want to claim your broadband bill as expenses too?

Claiming expenses for a product or service that is not exclusively used for your self-employment is where the HMRC has clamped down.
A product or service that is used personally as well as for self-employment does not qualify as an automatic business expense.

Before you claim business expenses you need to do some research.
Look here: https://www.gov.uk/expenses-if-youre-self-employed/overview
Scroll down to If you use something for both business and personal reasons and you'll find more info.

 

[MikeH]

.. If you use something for both business and personal reasons and you'll find more info.

Yes, you have to apportion your claim. I claim 50% of my broadband bill but 100% of my PC because for this job I need a Mac and I already had a Windows PC.

 

[AnandGupta]

andymc, my suggestion is that you hire a Tax Consultant to file the return on your behalf. Hope they charge reasonably in UK and they will also give you better suggestion on your job.

You see this is a hide and seek game between tax authority and the business person. A programmer can not fulfill it by shear knowledge of logic programming. Here there is no logic but loop holes to look for and pass through it.

Regards,

Anand

 

[keirS]

Yes, the online tax return form is quite easy to fill out. I did it this year for the first time, during my 1st year of business. You will see boxes for expenses and income. At the end you'll see the amount left and the amount you have to pay. I think the threshold is £10,700 so you may not have to pay anything. The things you list, in my opinion, are tax deductable - all the same Id list them as expenses anyway. The worst they'll do is correct you.

p.s. also add something for heating, lighting, travel costs - anything you wouldnt do if it wasnt for your job. Even eating out if you are visiting a client. You can also put work clothes down and laundry expense. Keep all receipts.

It's very likely the personal allowance (£10,600 last tax year) has already been eaten up by the OP's full time job. As for the worst they can do is correct you I am afraid that is not true. HMRC can fine you for up to 30% of the extra tax due. So if you get your tax return wrong and under pay tax by £1000 then they can fine you up to £300 on top of the £1000.

My advice to anyone in the OP's position who has very little knowledge of the tax system is to use an accountant. For the first couple of years. It's an allowable expense and will give you time to learn the ropes. By the way you can only claim for work clothing if it is a uniform or PPE and that is true for laundry as well. Being part time self employed it would probably be easier to use the simplified flat rate scheme for heating and lighting etc.