Do I have to pay tax on online income?

This entry is part 2 of 2 in the series Keeping your Business Accounts

Do you have to pay tax on online Adsense income, Amazon income, etc even it is a really small amount of money?

Does HMRC really need to know about my secret online income stream? Why would I pay tax on online income? ┬áIsn’t that my money?

Sorry, but the short answer is yes. If you are making money online on a regular basis, no matter how small, you need to declare it and pay tax.

Money made online is still income. And the tax man needs to know about ALL of your income when working out how much tax you owe them.

If you make money online from the likes of Google Adsense on your websites, you are self employed. That is, you have a self employed income. Regardless of whether you are employed in a day job, you are also self employed. And HMRC needs to know all of the details of your self employment income for tax purposes.

But if I don’t bother telling HMRC, how could they find out?

Online income is just that, online, and all the records are there in black and white. Payments from Google Adsense appear directly in your bank account statement. Trying to pretend that this money has come from any other source is a pointless exercise.

HMRC have sophisticated means of detecting attempted fraud, which tax avoidance is, so don’t risk a fine. Declare your income and accept in your business plan that a small amount of it needs to go towards tax.

It is important to note that only your PROFITS of online activities are taxable. That means your income minus all business related expenses. Expenses for an online business might include domain names, website hosting, software purchases, getting your website professionally designed and built.

So keep good records of your incomings and outgoings so that an accurate picture of your actual profit can be worked out. That way you can pay your tax in full and on time.

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