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2457245

Suspended
Original poster
Apr 24, 2010
9
0
Hey there,

I am a UK developer selling paid applications around the world.
I need some help regarding tax.
I contacted apple and apperntly i have all the correct forms filled out and everything but, i need to know wheter apple deducts tax before they pay me or do i pay my tax in the uk in april 2011 like all other income.
I could not get a straight answer from :apple: and i think they were getting cross with my stupidity :D:D
Can you please explain to me really simply what tax, if any i pay on my apps.

P.S i have sold over £6,500 worth if that helps
 

MickeyT

macrumors member
Apr 26, 2010
92
0
Newcastle, United Kingdom
Hello. I'm an accountant but not a personal tax expert, however I'd be surprised if Apple deduct any tax. I don't think it matters where the apps are sold geographically - if you conduct your business from the UK then you will be liable to UK tax.

If it were me, I'd initially imagine the following will apply, although I would contact Her Majestys Revenue and Customs (HMRC) to confirm:

If you are developing as a sole trader (you have not set up a company and are developing through that) then you will need to register as self employed with HMRC. If you have set up a company then you will need to complete a corporation tax return. I will assume for the moment that you are developing as a sole trader but let me know if you're not.

You will have to draw up a set of accounts that record the income that you have collected and any expense you have incurred. This could be expenditure such as software, books, stationery, a % of your internet if you work from home (although I think this would have to be agreed with HMRC prior to inclusion); essentially any cost you have incurred in the course of creating your app. You can draw these up separately or you can simply fill it out on the HMRC website.

This will net down to a profit or a loss depending on how much cost you have incurred. If you have made a profit then you will be liable to income tax on this profit at 20% or 40% depending on how much other income you have earned in the year.

If you have made a loss then you have a few options - I won't go into them to keep things simple at the moment on the assumption that you haven't spent over £6,500 on making your app!

You will also be liable for class 2 and class 4 national insurance. Class 2 is currently around £2.40 a week. Class 4 is 8% of your profit above £5,715, dropping to 1% above £43,875. You will need to register for class 2 NIC and pay this throughout the year. I believe class 4 is paid at the end of the year as there is a place on the tax return to declare it.

Also, if you have earned the income before April 6 2010 then you should be filling out a tax return for the tax year to April 2010, which means the tax return needs to be filed and the tax paid by 31 January 2011.

I'm not a tax expert at all, so if you want proper sound advice I'd talk to someone who specialises in personal tax - the above is the basics. There are various other things to consider too, such as deciding your year end and the effect this has on the overlap period you are taxed on, options for early year loss reliefs etc. To get this right I'd speak to HMRC at the very least, or a personal tax expert.
 

2457245

Suspended
Original poster
Apr 24, 2010
9
0
Thanks

Ok thanks guys :)

this stuff is blowing my damn mind i am so confused.
I understand that i get £6,500 tax free is this correct?

Apple already takes way 30% i was confused if this included tax because %30 to apple %30 to our lovely government leaves me with %40 Kinda crap

So do i have to register as self employed then!

I have already started keeping books as i am only 16 this stuff is putting me mad and i thought i better keep safe and note all sales and things.

I have just contacted my dads accountant and nobody seems to get how apple work with tax but he says to keep 30% aside for tax so i will do that.

Does anyone else have anymore knowledge to add?
maybe you are a developer yourslef?
 

MickeyT

macrumors member
Apr 26, 2010
92
0
Newcastle, United Kingdom
I imagine the 30% Apple takes would be treated as commission or something similar - this will be for the privilege of using their App Store to distribute your work etc

It won't be their responsibility to collect income tax off you. When you are employed by a company they are responsible for taking income tax off you through the PAYE system (Pay As You Earn). However, you are not employed by Apple and therefore you are responsible for dealing with your own tax affairs.
 

MickeyT

macrumors member
Apr 26, 2010
92
0
Newcastle, United Kingdom
Also, I reckon you've been advised to keep 30% aside to cover the 20% income tax and the 8% or so of class 4 national insurance. However, if you have no other earned income like you mentioned in your message to me then this won't be necessary. However, you need to bear in mind that the national insurance free threshold is lower than the income tax one so you can't rely on the fact that you won't be liable for either. Also, class 2 is payable regardless of your level of earnings.

I go back to my original advice as it is the best course of action - call HMRC.
 

jackal123uk

macrumors member
Jan 13, 2007
69
3
England
Sorry to dig up such an old thread but saves me starting a new one along the same lines.

Has anyone heard of HMRC persuing app developers for tax evasion?

I personally have no interest in tax evasion. At the moment development is just a hobby and my revenue is so small it isn't worth filing the paperwork - I'd rather revert my apps to free.

Since my day job puts me firmly into the 40% tax bracket, should my development endeavours become profitable I intend to register a limited company to keep things seperate from my personal income - I take it this is the accepted approach?
 

pulsewidth947

macrumors 65816
Jan 25, 2005
1,106
2
Sorry to dig up such an old thread but saves me starting a new one along the same lines.

Has anyone heard of HMRC persuing app developers for tax evasion?

I personally have no interest in tax evasion. At the moment development is just a hobby and my revenue is so small it isn't worth filing the paperwork - I'd rather revert my apps to free.

Since my day job puts me firmly into the 40% tax bracket, should my development endeavours become profitable I intend to register a limited company to keep things seperate from my personal income - I take it this is the accepted approach?

I started paying tax because I'd had a couple of people who were fined for tax evasion tell me to do so. The fines are upwards of £1000. Is it really worth risking it? Bearing in mind you'll be liable to pay tax and NIC on any amount you earn as you are already above the threshold.

Now don't get me started on if this is fair, when the people opposite me wheel out their 50" flat screen after signing on ;)
 
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