UK tax when selling service through my website (via monthly subscriptions)

the_learner

I live in UK and only pay taxes here. Every year I need to submit my self assessment but until now I only had my regular job, so all taxes were paid at source and I simply had to report this in the self assessment.

Starting this year I have opened a website where I have a private area that people can access if they pay a monthly subscription. So essentially I am selling a service online and I would like to understand how is this activity taxed?

I still have my regular job so I will still report my income in the self assessment but I was wondering if the additional income I get through the website subscriptions will need to be added to my regular income (and taxed accordingly) or if they can be classified and taxed differently.

Jeremy535897

If you have a regular job subject to PAYE as an employment, why did you need to complete a SA return?

Your website income will be self employed income and will be reported separately on your self assessment return, but the two sources will be aggregated in working out your overall tax liability. You will need to register as self employed as well.

the_learner

Hi, I need to complete a SA return because my total income is slightly above 100k. So I must register as self employed even if my main source of income is my normal employment? 
So, I guess if it is treated as different income (from self employment) I can also deduct the costs associated to running the website?

[Deleted User]

You would have to complete a return if you are self-employed regardless of your income. 

When completing the return you are asked basic questions to ‘tailor’ your return which leads you to the appropriate sections. You declare all of your income separately. 

On the self employed section you declare your income and expenses, including your website running costs, to arrive at a profit or loss. You declare your income from employment and the tax deducted thereon. A calculation appears to inform you of your tax liability, giving credit for the tax deducted at your employment.

Given your questions and the level of income would you not consider an accountant until you are up and running? The fees are tax deductible. 

the_learner

Hi, I expect that my income from the website won't be more than £1,500 this year. So paying for an accountant might cost me a lot in relative terms. 
On the Gov website I can see the tax free allowance is £1,000 so that would leave just £500 of my expected income to be taxed. If, as I understand, using the tax free allowance won't allow me to deduct any cost (like website costs, accountant fees, etc) then I guess this £500 will end up being taxed at my marginal income tax rate of 40%?

[Deleted User]

The marginal rate of income tax between 100000 and 125140 is actually 60% as you start losing your personal allowance when you hit 100000. 
You don’t have to use the trading allowance, as it’s called, if your expenses are more than 1000. Obviously it would be beneficial to claim actual expenses in that case.

Jeremy535897

Hi, I need to complete a SA return because my total income is slightly above 100k. So I must register as self employed even if my main source of income is my normal employment? 

Yes. See https://www.litrg.org.uk/tax-guides/self-employment/how-do-i-register-tax-and-national-insurance

Sandtree

the_learner said:

I still have my regular job so I will still report my income in the self assessment but I was wondering if the additional income I get through the website subscriptions will need to be added to my regular income (and taxed accordingly) or if they can be classified and taxed differently.

So going forward you will need to complete the employee and the self employed section of the SA form. The effect will be very similar to adding your net profit from self employment on top of your employee income. The threshold for declaration is based on revenue but the taxation is based on profit so for a website you'll be able to deduct off any hosting costs, advertising etc.