Overseas income. Is it taxable?

sgabello

Hi All,

I'm a web developer and I've got a full-time day job on which I pay taxes and NI through the PAYE scheme.

In my spare time I started to develop iPhone Apps. One of them ha been quite successful and is now generating an extra income (actually I'm earning more than my day job).

How should I manage this extra income? And how much will it be taxed? Bear in mind that this money comes from overseas... paid by Apple from the USA.

I heard people saying that it will be added to my annual income and likely to be taxed at 40% (because I'm close to that rate already).

Others told me that being an extra income, it will be taxed at 20%.

Where is the truth?

Also... In theory I'd like to save that money for the future, as the deposit for a house. What if I open a offshore bank account and leave the money there? Will I need to pay taxes in that case?

Thanks

Cook_County

I assume your employment contract does not forbid such activities.

You are of course self-employed and required to keep records, register for self-assessment plus possibly VAT and file tax returns as well as pay tax and NIC on your profits as adjusted for tax.

sgabello

Yes, my employment contract allows it as long as I don't work for competitors or my work doesn't go against company's interest. Therefore I'm fine with that.

Can I be self-employed and work fulltime as a normal employee at the same time?

Sorry if it may sound a silly question: is the offshore option illegal? I saw many banks offering that kind of account saying that is tax-effective way to save money... if you don't need it.

Mikeyorks

sgabello wrote: »

Can I be self-employed and work fulltime as a normal employee at the same time?.

Yes - that's what you're doing? You need to register as self employed (limited time to do that) and then complete both the self employed and employed sections of the SA Returns idc.

is the offshore option illegal?

No. But you need to declare both the deposits and interest as income. They're mandated to declare detail to HMRC now ....... so it's not the haven it used to be. HMRC ran an amnesty last year ..... that's now finished, so it would be treated as evasion.

sgabello

Looks like hiring a good accountant is the only way forward

Just to understand... does it mean that all that income will be taxed at 40%?

Mikeyorks

All the income that (on 10-11 rates) takes you over £43875.

An accountant sounds a good idea. There are undoubtedly some costs to offset? But 'web developers' won't have too many offsets?

chrismac1

There are bound to be quite a few claimable expenses here. For example I'd imagine you are making use of your own home for this business. When it comes to the 40% tax, if you're going just a little bit over the 43,875 a good idea could be a pension contribution depending on your existing pension arrangements.

It is no longer the case that investing in a pension means handing over your cash to a fund manager who is going to rip you off and deliver poor investment performance. There are a whole range of low-cost options from managing your own fund entirely to letting someone else manage the whole thing (not so low-cost) and everything in between.

nrsql

If this is going to be an ongoing thing it might be worthwhile setting up a company. Then it could hold the money and pay corporation tax - you would only be taxed and pay NI on money you pay to yourself- dividends would avoid NI. Might also be useful to limit personal liability.

sgabello

I also spent quite some money in advertising... I'm just wondering if I can claim these expenses back even if the company wasn't already set up yet at the time.

Also... I'm just curious: why some people said that being an "extra-income" should be taxed only at 20%? What would it make fall into this scenario?

jennifernil

sgabello wrote: »

Also... I'm just curious: why some people said that being an "extra-income" should be taxed only at 20%? What would it make fall into this scenario?

Ignorance of the facts?