Google Adsense and tax

turnip2323

Hi,

I've had Google Adsense on some of my domains for a while now, but the money I was making fluctuated quite dramatically in the past. However, more recently the amounts have shot up to the tune of a few hundred a month and it looks like it will stay that. This has made me paranoid that the HRMC will be knocking on my door if I don't tell them about this extra income!

I work full-time and I've never been self-employed. Googling around it looks like I should do a self-assessment if I want to declare my income from Adsense. Does anyone have any insight into what I have to do for this? I have no paperwork, just my Adsense statements. Will the HRMC contact them for payment information? Will I get in trouble for not declaring my old Adsense earnings (those older than a year) for the upcoming self-assessment?

TheCyclingProgrammer

I'm not sure receiving passive income from AdSense counts as a "trade" so I wouldn't have thought you'd need to register as self-employed but you must notify HMRC about the income and really you should have done already.

As to whether you'll need to fill out a self-assessment, it depends on the level of income. HMRC may be able to collect the extra tax through your tax code and if they can do this they will as it is preferable to you having to register for self-assessment. I think the limit is £2500. If you earn more, you may have to do a tax return.

Untaxed income has to be reported within 6 months of the end of the tax year. So you should have no problems reporting the income you earned in the last tax year (2013/14) if you report it by October.

If you're honest with HMRC and disclose your income for earlier years then yes, HMRC do have the power to fine you for failure to disclose untaxed income. I'm not sure what the fine would be. I'll leave it to your own moral judgement of whether you want to disclose it but if we're talking a few hundred quid then its hardly crime of the century. At least you're dealing with it now.

Read the first section of this page and follow the links to find out how to contact HMRC:
http://www.hmrc.gov.uk/report-changes/individual/income.htm

If you do need to do a tax return for the 2013/14 tax year, you'll have until October to submit the paper return or January to submit online. Its fairly straightforward - you'll fill out the main details, an employment supplementary sheet detailing your main income from your job (you'll need your P60 for this) and then the Adsense income in the "any other additional income" box and enter "Google Adsense income" in the description box. If you have incurred any allowable costs (unlikely but still) you can offset these against the income.

HTH.

agrinnall

TheCyclingProgrammer wrote: »

If you have incurred any allowable costs (unlikely but still) you can offset these against the income.

HTH.

Given that the OP has said this is happening against his/her domains would some or all of the cost of setting up and maintaining those domains be allowable?

TheCyclingProgrammer

agrinnall wrote: »

Given that the OP has said this is happening against his/her domains would some or all of the cost of setting up and maintaining those domains be allowable?

I don't know. Does the normal wholly and exclusively rule apply to this kind is income? If so, then it would depend if OP purchased the domains for the sole purpose of running Adwords or if they bought them for some other purpose I think (so still unlikely IMO).

antrobus

turnip2323 wrote: »

Hi,

I've had Google Adsense on some of my domains for a while now, but the money I was making fluctuated quite dramatically in the past. However, more recently the amounts have shot up to the tune of a few hundred a month and it looks like it will stay that. ....

You are not the only person who has set up a few websites as a 'hobby', and then discovered it's turned into a business. It happens.

turnip2323 wrote: »

....This has made me paranoid that the HRMC will be knocking on my door if I don't tell them about this extra income! ....

Unlikely in the short term. Although who knows what they will target on their next campaign.

turnip2323 wrote: »

...I work full-time and I've never been self-employed. Googling around it looks like I should do a self-assessment if I want to declare my income from Adsense. Does anyone have any insight into what I have to do for this? ....

https://www.gov.uk/register-for-self-assessment

turnip2323 wrote: »

..I have no paperwork, just my Adsense statements. Will the HRMC contact them for payment information? ....

No. It's self assessment. HMRC will believe what you tell them, unless and until they have reason to suspect otherwise.

turnip2323 wrote: »

..Will I get in trouble for not declaring my old Adsense earnings (those older than a year) for the upcoming self-assessment?

No. The worse that would happen is that you would have to pay the interest on late payment of any tax that was due for the old years. HMRC tend not to punish people who volunteer to pay tax.

turnip2323

Thanks for the replies - much appreciated.

To clarify, I did create the first website as a hobby and enabled Adsense on because if it made enough money to cover the domain/traffic costs then it's all good. I basically got used to Adsense money coming into my account at the end of each month. Obviously that's no excuse! But when the payments started dropping off I figured that was it and I had had a good run. However, as I said it's started picking back up lately. The first payment I received from Adsense (after I hit the £60 threshold) was the beginning of 2013. As I say, it climbed up to a few hundred a month, started dipping back down, and has recently been getting high again.

I must have read some conflicting information about the self-employed thing so thanks for clearing that up. Obviously there are some people out there who make a living off this kind of thing but I'm not one of them. How much tax would I end up paying for the year? At this rate, it may be a few thousand I've earned before the whole year is out.

agrinnall

Assuming you earn above your personal allowance then you'll pay tax at your highest rate - that's likely to be 20% if you earn under around £41,000 including the Adsense payments, or 40% if you earn more (higher still if you earn a great deal more).

TheCyclingProgrammer

Difficult for me to quote individual bits on my phone but re: being self employed, it's certainly possible that somebody who earns money from Google Adsense is trading/doing it as a business and therefore would need to register as self employed, it just doesn't sound like it in your case.

There's more to "trading" than just earning money. If for example, you were running multiple websites, perhaps providing free content and advertising them to increase traffic and generate an ongoing revenue stream from Adsense or other online advertising, this would be a pretty clear example of trading or running a business.

In your case, it's as you say - you already had a website and stuck some ads on it to try and cover your costs and got lucky and now have a passive income stream. So IMO you aren't trading or running a business.

Your circumstances could of course change and I'd suggest if your website ever becomes more than a hobby or you start to actively manage your Adsense income in some way, then you may want to reconsider your position.