UK Tax on affiliate income

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evilgreenmonkey

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Apr 18, 2007
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www.evilgreenmonkey.com
Hi,

How do you guys handle tax on your affiliate income? I've heard that the best path is to set-up an Ltd as corporation tax is lower than income tax. Do you just plough it straight into your personal bank accounts and take the 40% income tax route?


Cheers,

Rob
 


My main income pushes me into the 40% tax bracket, so any affiliate earnings will be taxed at this max rate. My affiliate projects should result in a sizeable ROI, so any tax savings are well worth it. I'll probably get an accountant later down the line, although thought that I'd draw on other people's experiences first.
 
Hi.

Tax rates are changing as in this years budget. So the tax advantages of having a limited company won't be as great from 2009:

Mr Brown said the rise in the rate of corporation tax on small businesses was to reduce the tax difference between those who are self-employed and small companies.
He said he needed to do this to avoid individuals "artificially" incorporating themselves as small companies in order to "avoid paying their due share of tax".


They did away with limited liability a while ago too, so for a small business there's not a lot of benefit registering a company - you might save a bit though on income tax - pay yourself a salary at your tax limit and the rest as dividends which I believe are still taxed less than income.


If you are getting payments from a lot of different sources then it would be better to have a separate bank account (makes self assessment a lot easier!) most banks give 12-18months free business banking.


GL

~Si

EDIT: Just seen you said you're in the 40% bracket - ignore the bit about paying yourself a small salary, I'll leave it in as it might be useful to other people.
 
evilgreenmonkey said:
Great advice, thanks for that. I've already registered a company although I'll just keep it dormant for brand protection.
Click to expand...

Good move. The last thing you need is to get your business up and running under a trading name (you as a sole trader), get your website built, branding done, etc, only for someone to come along and register the LLC. A lot of hassle. ;)

Regarding the tax question, I believe the rule of thumb is that once you turn over more than ~£33k annual profit it's worth registering as limited. Up until that point the costs of having a limited company outweigh the tax benefit.

But as I said this is only a rule of thumb. If you're in the 40% income bracket and this is a question worth considering you should really, really be using an accountant. One guy who comes highly recommended is Home - James Smith Chartered Accountant Suffolk
 
I agree - if you are earning enough to be in the 40% bracket then your time is probably worth more than the cost of using an accountant.

Though I've been selling physical goods for the last few years and it looks like self assessment is going to be a shit-load easier with most of income from affiliate programs etc. (Of course I still use my car for business though ;)...)

Cheers for the rep!
 
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