Declaring extra income and claiming relief

klaatu

I am in full-time employment as an employee. In my spare time, I write software which I give away but invite voluntary donations. It's only a small amount, about £150 this year so far, but donations seem to be on the increase - about half of that amount came in the last month.

Presumably I will need to do a tax return (or whatever it is these days) next April and declare this income? If I spend the money on something genuinely related (e.g. a new computer, or software) can I claim this against the tax I would pay? Or would I have to set up a business to do this?

Steve

fengirl_2

By selling your software, you already are in business.
As things stand at the moment, I would just declare this income as casual fees on your self assessment. However, as you state, you are incurring expenses, such as buying a PC, etc and these may exceed your income, in which case you could argue that you are just carrying out a hobby and not trading with a view to profit. Keep accurate records of income and expenditure as the year progresses and then take a view at the end of the year.

klaatu

Thanks - I'll do that (am doing already, actually).

Steve

saveallmymoney

my situation is similar, if i make a "loss" can i offset this against my PAYE tax?

sdooley

You need to notify HMRC within 3 months of establishing yourself as a sole trader otherwise there is an automatic £100 penalty.

Expenditure wholly for the business is tax deductible; what is difficult is when the Revenue try to argue it's partly for something else so you shouldn't get a deduction.

Debt_Free_Chick

saveallmymoney wrote: »

my situation is similar, if i make a "loss" can i offset this against my PAYE tax?

Unfortunately not.