Are you paying your taxes?

by Martin Reed on 19 March 2007 in Snippets

It seems that here in the UK, the Inland Revenue is really starting to take a strong interest in people who are making money online but have not declared themselves as self employed, and are therefore not paying any tax on their income.

Warnings have started to appear on eBay reminding people that if they are buying items and selling them for a profit, they need to register and pay tax. These warnings have recently been extended to affiliate management providers such as TradeDoubler:

TradeDoubler Tax Notice

Screenshot showing TradeDoubler tax warning

If you are unsure as to whether you would be considered as self employed, you can visit the Revenue’s website. If you are making money online (or anywhere else outside of your place of employment) the chances are you will need to register with the Inland Revenue. You have to do this within 3 months of beginning trade, otherwise you will probably be hit with a £100 fine.

I started Just Chat purely as a hobby. It was making money for around 2 years before I registered as self employed. To be honest, I was extremely worried by this stage as I had not paid any tax on my earnings. I got an accountant who was very patient and registered me as self employed and completed my tax returns for the previous two years. I got stung with a large National Insurance Contribution bill, but actually ended up receiving an income tax refund as I had overpaid tax in my full-time job, which only came to light after filling in my self assessment tax return. I also had the £100 fine for not registering waived because my earnings were so low at that time.

If you have been making money online and have not been declaring it, be warned that the Inland Revenue is taking a strong interest in undeclared online income. If you are worried, speak to an accountant. Your story will not surprise them, and they are you best route out of trouble! The Inland Revenue will be far more accommodating if you register as self employed late, compared to if they contact you asking why you haven’t been paying your taxes. Be warned!

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{ 5 comments }

Bollywood October 1, 2007 at 11:29 pm

I think, everyone must pay taxes, if he want see growing his country.

Martin Reed - Blog Author October 3, 2007 at 8:28 pm

Bollywood – Taxes and death, that is all that’s certain in life. Just make sure you pay the first and spend all your money before the second!

Mark November 11, 2008 at 11:18 am

Nice post, I enjoyed reading it.

I tottaly understand how you felt thoguh. 7 years ago I started freelancing as a bookkeeper, for the first 6 months I didnt even get a nibble, but after 6 or so months I started making serious money, worried that i wasnt paying my taxes, I decided to take 20% from all paymnet and put them into an ISA savings account.

Year end came and I had earned a large ammount, thankfully I had put the “taxes” , the whole time my tax was earning interest too ;) . I decided to do my own accounts and register myself selfemployeed. 6 years later, I run a succesfull accounting firm in the UK,

Best of luck , Mark Baines

Martin Reed - Blog Author November 17, 2008 at 8:25 pm

Mark – What a great story! Thanks for sharing :)

efile December 24, 2008 at 9:51 pm

Nice post, I enjoyed reading it.

I tottaly understand how you felt thoguh. 7 years ago I started freelancing as a bookkeeper, for the first 6 months I didnt even get a nibble, but after 6 or so months I started making serious money, worried that i wasnt paying my taxes, I decided to take 20% from all paymnet and put them into an ISA savings account.

Year end came and I had earned a large ammount, thankfully I had put the taxes , the whole time my tax was earning interest too ;) . I decided to do my own accounts and register myself selfemployeed. 6 years later, I run a succesfull accounting firm in the UK,