Accounting for Bloggers: Trade or Hobby?

With a new financial year descending upon us it’s a perfect time to brush up on what you need to think about this year with regards to any money your make through your blogging. Here Georgi Rollings (right), the founder of Starfish Accounting, starts off a five part series on Accounting for Bloggers…

Some people blog for the love of it.  Some bloggers view it as their job, and as their main source of income.  Most of us are somewhere in between.

When does blogging move from being a hobby to being viewed as a trade – and what does that mean?

The basic rule is if you earn income from blogging, then you need to register with HM Revenue & Customs (HMRC) and pay tax on that income.  That income could include advertising campaigns, Google AdWords, being paid to write a review, etc.

If blogging is a hobby, you don’t blog with the intention of making a profit, and you only very occasionally receive something in return then you should be OK.  Keep track of any amounts that you do earn, deduct any costs of running your blog to calculate your profit, and if the total is under £2,500 then you can ask HMRC to adjust your tax code so that any additional tax is paid via PAYE.

On the other hand, signing up for Google AdWords, or selling advertising space, shows clear intent to make money from your blog.

The shift from hobby to trade is a grey area and can happen gradually.  But you need to be careful – HMRC won’t accept lack of knowledge as an excuse, and you could end up having to pay penalty charges as well as back taxes.

What do you have to do if blogging is a trade?

• You need to register with HMRC as self-employed as soon as possible.  This involves completing a simple online form.
• You will have to pay income tax if your income, including any from other sources, is higher than the personal allowance (£7,475 for the 2011-12 tax year).
• You will also have to pay self-employed National Insurance Contributions (NICs) – although if your earnings will be less than £5,315 (2011-12) you can apply not to pay Class 2 NICs which are otherwise £2.50 a week.  Class 4 NICs are also payable if your profits are over £7,225 (2011-12).
• You will have to complete a self assessment tax return by 31 January following the end of the tax year (tax years run from 6 April to 5 April, so if you make income from blogging from January 2012 onwards, your first tax return will be due by 31 January 2013 if filing online).
• Make sure that you keep track of any income you make, and any expenses, so that you have the information to hand when you do your tax return.

If you stop earning money from your blog, you simply write to HMRC to tell them that you’ve stopped trading – although you will still need to complete your self assessment tax return for the year when you stopped trading.

Still not sure if your blog is a hobby or trade?  Ask an accountant for advice – or post a comment below.

Watch for Georgi’s post next week, “What expenses are tax deductible?”

About Starfish Accounting

Starfish Accounting provides accounting, tax and bookkeeping services to small businesses and works primarily with women in business.  Georgi Rollings, the founder of Starfish Accounting, is a qualified Chartered Accountant with more than 15 years experience.  Georgi is also proud mum to beautiful twin girls, and juggles business and babies out of her home office in Maidenhead, Berkshire.

Tel:  01628 299 310

Email:  info@starfishaccounting.co.uk

Web:  http://www.starfishaccounting.co.uk

Blog:  http://blog.starfishaccounting.co.uk

Facebook:  http://www.facebook.com/StarfishAccounting

Twitter:  https://twitter.com/#!/StarfishAcc

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