Additional income from apps

pledgeX

I’m in the process of writing a couple of apps which, if all goes well, I will put on the Android store. This has the potential of earning money via in-app advertising and in-app purchases.

As I understand it, I have a £1,000 tax free trading allowance, and as long as anything I earn through my app(s) amounts to under £1,000, I don’t need to do anything (don’t need to register as a sole trader, complete self-assessment etc). Is that correct?

Now if I get very lucky and do manage to earn over £1,000, what I don’t want to do is stitch myself up down the line as I assumed I’d be under the limit. What would I need to do if I go over this limit, and, more-importantly, is there anything I should do now that would make this easier if I set it up now rather than in several months/years time when I reach this limit?

I’m currently in full time employment, so this is just some additional work on the side. My wife only does part time work however and earns less than the personal allowance so doesn’t pay any tax. I’m not sure if there’s any kind of setup which would mean this can go against her income rather than mine to reduce the amount of tax due?

00ec25

you are correct that <£1k total income (ie it is a gross figure, not a net figure after costs have bene deducted) per tax year has no impact


when/if you go over that then you will be classed as a self employed trader and need to work out your profits (income less expenditure ) and declare those to HMRC. They may opt to adjust your tax code rather than make you do a formal tax return. It would then be your responsibility to update them each year


whether you are under or over £1k it would be essential to keep records of income and expenditure so you can prove (if ever challenged) what your trading history was from the start

pledgeX

Thanks for that, really helpful.

If I were to go over the 1k limit, what's to stop my wife being the one who registers as self employed, and funds from the apps going into her account rather than mine? She's unlikely to earn more than the personal allowance any time soon so this would save on the tax front.

00ec25

pledgeX wrote: »

what's to stop my wife being the one who registers as self employed, .

a whole raft of legislation which I'm not that familiar with but it covers "settlements" ie moving money between spouses for no reason other than to avoid tax


the bottom line is your wife is not the originator of the work you will be selling - she has no entitlement to the income from it so even if she registers as self employed it would not survive scrutiny - of course the chance of it being scrutinised is a different question

laticsforlife

Surely you could arrange things so she does something (legitimate) in the business that you can 'pay' her for, thus she earns most of the profit and reports it (if need be).

It's an age old argument of 'wifes wages' for answering the phone, collecting those building materials!, writing invoices etc.

In your case maybe it's answering queries from the app store, collecting the funds, paying for supplies (new USB sticks, whatever!), doing the books in a spreadsheet on her iPad.

It's not hard to make it fairly legit, and so long as you don't start making Fortnite money, you'll be fine, HMRC is busy looking at what Brexit is going to do than to chase little 'ole you.:beer: