It feels like an eternity since the amazing weekend that was at BritMums Live and to help keep the magic alive for a little longer I thought I’d write up an overview of the Blogging Foundations: Accounting session that I attended on the Saturday.
I have to be honest, the part I was most looking forward to was hearing from Georgi Rollins from StarFish Accountancy. Having just given up work to move to the countryside I have registered self-employed and will focus some more energies on earning money via my blogging and writing, so this session came at the right time for me.
I contacted Georgi to ask for some advice about starting up, the services she could offer me and asking if she would share her slide presentation with us, luckily she is a sharing sort and you can view it here –
Georgi is herself a Mum of twin girls and that was why she left the corporate world to set up her own accountancy business, as such she understands the constraints that parent bloggers work to and is flexible in her approach.
The slides are quite clear and I don’t want to just repeat everything on them, so I’ll try and add a few notes I took during the session and of course the Starfish Accounting website is very good, there are lots of articles on there to help you get started.
Hobby or business?
The first point Georgi made was that we need to distinguish if we are blogging as a hobby or as a business. If we set out to make money, by placing adverts, sponsored posts or setting up Google adwords etc then we are a business. If you gained the odd voucher in a year as a thank-you for something then you could probably get away with being a hobby blogger, but regular means business even if your income is very low.
Register as self-employed
If you need to register as self-employed this is an easy process and Georgi urged us to contact the newly self-employed helpline run by the HMRC as she said they were very helpful. I also see they offer free one day courses to help get you started. The tax year ends 5th April and you then have until January the next year to get your self-assessment filed online.
Once a tax year ends if you realise you have been earning income and that really your blog is a business then it is probably best to call HMRC and declare that, Georgi said they are generally quite friendly and prefer people to come forward of their own accord. Of course the amount you are declaring and the time frame may have an impact.
She also said that if you are just making a small amount and you don’t have any income coming from anywhere else then the tax man may not want the aggravation of the paperwork for you. To cover all bases give them a call and ask what they would like you to do.
It is important to note that once you are successfully earning enough that your tax liability (the amount you should pay) is £1000 or more you will then need to do ‘payments on account’ which means you will pay twice a year and some is in advance of actually earning it, see this example from the HMRC –
The relevant amounts for 2003-04 were:
|Class 4 NIC||£650|
Therefore the payments on account required for 2004-05 are:
|31 January 2005||£3,202.50 + £325|
|31 July 2005||£3,202.50 + £325.|
Allowable Business Expenses
On slide 5 we see the expenses that we can claim against for our business (always remember to keep all receipts and file things so they can be found if you need to).
You must remember that any cost you declare as an expense must be wholly and exclusively used for your business and therefore you cannot probably claim the whole cost of having broadband to the house. You need to work out the percentage of the time it is used for business. Telephone is the same and you could literally go through your bills line by line and itemise what is business but it would also be OK to take a percentage cost as long as it is seen as reasonable. The greedier you are the more likely the tax man will question it.
It was good to hear that there are quite a few expenses we can claim but also I realised this is a bit of a minefield for a newbie like me, as we talked about how website cost could be claimed for but costs of setting up your website need to be recorded in a different area to your hosting costs for example, this is probably where I need an accountants help! Georgi then informed us that we cannot claim for childcare, entertaining clients nor our coffees when away at a conference. Have a look at this blog post from Georgi, it is great as there are 55 comments on there with questions and answers to all sorts of expense queries.
These are the big costly purchases we might make, those that are expected to last us more than one year – such as a laptop or office furniture. I was particularly interested in this bit as I have just purchased a new laptop but if I’m honest it sounded a little complex. Basically if I earn enough this tax year I might want to declare the £550 I spent on the laptop by putting one lump sum for that amount in the investment allowance box on my self-cert return. If I don’t then I can ‘disclaim’ the capital allowance and hold it over until another year when I do earn enough and it is more beneficial to me to declare the purchase.
Working from Home
You can claim costs for working from home and currently this is set at a nominal £4 per week, however with a bit of calculation, as shown in slide 9 you could actually claim far more than that as an expense.
Slide 10 gives a good overview of all the types of income that you will need to declare. Remember that you need to declare your income in the month it was earned, ie: you write a sponsored post in Jan and invoice for it in Jan, but the payment does not come through until April. The income is still for January and can actually be in a different tax year to when the money is received.
Payments in Kind
Georgi described this as a grey area. Generally the rule is that if you receive goods, products, services, discounts or vouchers for personal use then you do not need to declare those. If you choose to sell them then you will need to declare the sale price of them.
For very expensive holidays then it is probable that you should declare them, especially if your family have also enjoyed them. As it is always just the part that you use to do your job (ie: review them) that is not taxable.
Georgi confirmed that if we are giving something away on our blog there is no tax implication for us as we have not made any gain from it, unless of course we were pad to host the giveaway and then that is income we need to declare.
I hope my ramblings have helped a little, I found this part of the session so helpful and we really could have done with a lot more time. For all my future queries I’ll be happy to go to Georgi and ask for her help, I’m just working out at the moment if I think I will earn enough to engage her as my accountant and of course the bonus there is that her professional fee will be an allowable business expense!
Happy blogging, Mich x