The Tax Details Bloggers Need To Know

When I graduated in May, starting my new life as a full-time blogger was something I felt as though I’d been waiting for, for a very long time indeed. When I started scarlettlondon.com back in 2011, I could have never imagined it would spiral into what it is today. In fact, I didn’t even know the whole blogging world existed back then (or that what I had created was a blog) and to this day, it still amazes me what incredible opportunities can come from setting up your own little space on the internet and writing your heart out. It’s like a dream come true to be able to dedicate all of my time to it.

However, in the months prior to going full time, I began preparing for the self employment and was a little taken aback by how little information there is on being a blogger and what you need to do in order to set yourself up legally. In The Frow had a very helpful post, which I’ll link here, but aside from that, the majority of those who were giving advice were based overseas, so it had little relevance to UK laws and the HMRC tax system we have.

Being your own boss is incredible, but it also comes with the responsibilities of a boss too. All the stuff you don’t really need to worry yourself about if you’re employed by a company. And I’ll admit, at first, it was rather scary.

For the first couple of months I started doing my own bookkeeping and in January, I submitted my first tax return. I will admit, it was rather painful (especially if you, like me, have problems with your login details and have to spend over 4 hours on the phone to HMRC – woo hoo!) but it’s obviously necessary, so it’s something you have to do.

In February, I made the decision to get myself an accountant – partly because I was grateful for the advice and also to reassure myself that I was doing everything by the books. I’ve just submitted and already paid my tax bill for 16-17 (early-bird, I know) but in order to save others the same stresses, I thought I’d put together a little list of tips if you are thinking about going full time – or are already, and aren’t sure if you’ve grasped the whole tax thing yet.

OLYMPUS DIGITAL CAMERA

[ezcol_1third]OLYMPUS DIGITAL CAMERA[/ezcol_1third] [ezcol_1third]OLYMPUS DIGITAL CAMERA[/ezcol_1third] [ezcol_1third_end]OLYMPUS DIGITAL CAMERA[/ezcol_1third_end]

To get an accountant, or not to get an accountant?

I know lots of bloggers who haven’t got accountants and are managing absolutely fine with submitting their own taxes. It’s personal preference – and of course, I understand you can save yourself some money if you do it yourself. I did quite a bit of research before getting an accountant, because I wanted to weigh up whether it was worth the additional cost. When you’re setting up your own business, it’s scary to have to think about yet another outgoing but I do think the positives weigh out the negatives.

One of the main factors for me was that I’m looking to get a mortgage in the next few years and the majority of places I researched (and asked) told me that I’d need at least two years of accounts with a chartered accountant in order to set myself in the best possible position to secure one. When you’re self employed, mortgages are notoriously difficult to secure, so I wanted to make sure I made it as easy as possible for myself when the time eventually comes.

How much do they cost?

Accountants can range in price, depending on the area you live and the training the individual/business has had. Really, you want to be looking for a ‘chartered’ accountant. But it’s totally up to you.

Then, once you’ve found one you like – you have to decide whether you want them to manage your accounts entirely, or whether you’d like to do the book-keeping and then they tot it all up, do all the fancy maths and double check you’re deducting the right things, before submitting it all for you. I opted for the latter because it was the cheaper option and I also like putting all of my earnings and expenses into a spreadsheet each month for my own personal knowledge. It’s quite grounding to know just how much you’re spending – because if you’re saving for a house, it can be a bit of a wake up call to stop splashing out in certain areas.

I pay just over £50 a month for my accountant, so it works out around £600 per year. I use the lovely Visionary Accountants near where I live, as they’re very friendly, easy to work with and flexible to the needs of the ever changing and evolving blogging world. I send them over all of my receipts, bank statements and then a big spreadsheet of expenses and earnings – and they do the rest. I can also go to them for advice whenever I need to – which is really handy when you’re just starting out and like me, have no clue about how the business world works. They’ll be the ones to know whether it’s going to be more profitable for you to set up a limited company, or keep it as a personal self employed business.

What can I expense?

When you’re self employed, you are able to expense anything that you buy in relation to your business. In other words, you can deduct the cost from your profit, so you don’t pay tax on it. For example, if I earned £1000 from blogging in a month but spent £500 on a new camera, then I could deduct the purchase from my ‘profits’ as a business expense. So I’d only be eligible for tax on the remaining £500.

But after that simple explanation, things get a little trickier from there. Because blogging is such a new industry, the lines are a bit hazy about what you can and can’t claim for. Technically, a blog is about someone’s life – so life expenses like getting your hair highlighted, maintaining your manicure and buying a new outfit to photograph from Topshop, is business related to. This is why I find it so useful to have an accountant – because they can best advise what they think is right. Technically, you can only expense something that is wholly and exclusively for your business, but again – with blogging the lines are blurred because business is life and vice versa.

I always work it out as – if I’ve written about it or featured it on my blog, Instagram or twitter more than once, it’s for my business. I don’t expense everything, as you have to be fair – but if I’ve bought a new beauty product for my roundup or a suitcase for a press trip, then I tend to count it.

Similarly, if I have to catch the train to an event or a meeting, that’s also an expense. Food while you’re at a meeting is also an expense. But obviously you can’t expense your entire Sainsbury’s shop.

As I said, because blogging is such a new industry, there’s not masses of advice but usually using your own common sense is absolutely fine – and if you’re unsure, leave it off.

OLYMPUS DIGITAL CAMERA

So how much tax will I need to pay?

Again, it depends. If you’re blogging full time as your only job – then it’s quite simple, but if you have more than one income stream, again it gets a bit tricky and it’s worth getting the advice of an accountant.

The tax you pay totally depends on what you earn, although everyone has to make National Insurance contributions each month – and these are tallied up at the end of the tax year and added to your bill. If you make over £6,000 in profit in a year, you will be billed £2.80 per week for these.

Every individual in the UK gets a £10,660 personal tax free allowance, which means you’re able to earn up to that amount without paying any tax. So if in one tax year you earn £8,000, you won’t pay any tax at all. You may be required to pay National Insurance though.

However, once you start earning over your personal allowance, you are taxed 20% on your earnings outside of £10,660. For the next tax year (2016-2017), the allowance increases to £11,000 – so you won’t have to pay any tax until you reach that band.


 

Shop the post:

 


So am I going to have a massive bill that I can’t pay?

Well if you don’t set aside money every month, then the short answer is yes. You know when you hear of big celebrities going ‘bankrupt’ and we always wonder how on earth they can have such little money when they’re basically millionaires? Well it’s usually because they’ve been hit with a big tax bill – and they haven’t saved a single penny.

While it’s tempting to treat yourself and going on shopping sprees, self employed life, especially in the first few years is quite unpredictable – and it’s good to prepare for every eventuality. I set aside 25% of everything I earn and put it away in a savings account which is called ‘Tax’. Then it’s all ready to go when I need to pay it – and sometimes you might even have some leftover to treat yourself for being on time (or early in my case). Unfortunately this wasn’t the case for me this year, but hey – at least it wasn’t a huge shock or surprise.

Keeping as organised as you can is key to making sure that the whole tax thing isn’t an issue for you. The tax year runs from April to April, with the first payment on your bill due in January of the following year. So you would have time to prepare, but make sure you’re not caught out! It’s better to be safe than sorry.

OLYMPUS DIGITAL CAMERA

Lets calculate that then…

So if I earned a total of £25,000 from blogging in one year, but £7,000 of that was expenses, I would be left with a profit of £18,000. I’d have my tax free allowance which is £10,660 deducted so there would be £7,340 remaining that would be eligible for tax.

Are you self employed? Do you have any tips for keeping on top of things – or getting a mortgage? 

Share:
  • This was a great read Scarlett, thanks for sharing! I used to be self-employed many years ago although I couldn’t afford an accountant so had to work it out myself, it was so scary! 🙂 xx

    • Scarlett London

      Glad you enjoyed it, thanks for reading Holly! x

    • Same here – I used to be self-employed years ago but I was earning very little and I couldn’t afford an accountant. I recently decided to become a freelancer after some issues at work and in some of my previous jobs, and I still can’t afford an accountant.

      Chichi
      chichi-writes.blogspot.co.uk

  • This is so interesting and definitely one to bear in mind as I start to blog more and more. Thanks for sharing lovely x
    Sophie Cliff

    • Scarlett London

      Thanks for having a read Sophie! 🙂 x

  • This is so informative! What happens if you don’t meet your tax allowance, can you still claim back expenses?
    – Arora xx
    http://www.aroraappleby.com

    • Scarlett London

      I believe so, you’d still submit your tax return but just wouldn’t be eligible for any tax 🙂 x

  • Scarlett London

    Aw thanks Sophie! x

  • Loved reading this. I currently do my own tax return and only deduct cameras / equipment / props and travel expenses. I have never deducted items I have bought for featuring on my blog, or part deducted them. As I thought you couldn’t do this for clothes. But, it is interesting to know 🙂 xx

  • jodie.keith

    This was such a helpful post! Thank you! Definitely saving for the future!

    Jodie @ Jodetopia x

  • Sassy In The City

    I’ve just left my career and job at GQ to pursue my blog full time so this was HUGELY helpful – thank you! x
    Lauren, Sassyinthecity.com

  • This is such a helpful post. Thank you. I’ve decided that I would like to start freelancing properly (but I would still go into full-time employment).

    Chichi
    chichi-writes.blogspot.co.uk

  • I read your blog posts in the last hour. I really enjoy what you are doing here.Thank you for helping people get the information Accountants In London

  • Hi Scarlett,

    Do you have to declare any items received for review consideration? And would you be taxed on the value of these items?