An Introduction to Tax brought to you by Earnr

With the tax deadline approaching, our friends over at Earnr have given us the lowdown on everything you need to know. We know it can be confusing when you’re doing your first self assessment but Earnr have made it simple and easy to do! Read below to get the basics on everything tax related!

An Introduction to tax for creators at Thortful

Being a Thortful creator is a great way to stay creative while earning money on the side.

The more designs you sell, the more you might start to wonder whether you need to tell HMRC about your extra income. That’s why we have written a brief overview of all things tax you need to consider when you are a Thortful creator.

When do I need to tell HMRC about my creator income?

HMRC allows you to earn £1,000 a year before you have to register as self-employed or declare your income to them. This is your ‘tax free allowance’ and applies to anything and everything you earn as self-employed income (like Thortful).

If you earn more than £1,000 in the year, you need to declare this income to HMRC through a Tax Return (also known as a Self Assessment).

If you’re not sure if you’ve earned that much, you can find your total income by viewing the payouts section under your account  on Thortful. 

‍What do I need for my tax return?

  • A Unique Tax Reference (UTR) number
  • Your personal details
  • An overview of your earnings (from Thortful and others)

While you may already have your personal details and overview of your earnings to hand, most people don’t have their UTR.

A UTR is a unique 10-digit number that you get from HMRC after you register to do a tax return. It’s very similar to your National Insurance number, but it’s specifically used for your tax return.

You can register for a UTR directly with HMRC or do it for free with Earnr.

While most UTR registrations take 10 business days, they can take up to 10 weeks  – so make sure you do this as soon as possible.

I already have a UTR – what do I do next?

You’ll need to submit your tax return to HMRC. A tax return, or Self Assessment, is an overview of your earnings for the year. This includes your Thortful income, but it can also include income you receive from employment, letting out a room, dividends, interest, or any other capital gains you’ve made.

You can submit your tax return directly with HMRC, an accountant, or through an app like Earnr. Unfortunately HMRC isn’t the most user friendly organisation, so using an app like Earnr will significantly speed up the process and will leave you a little less confused!

What expenses can I include on my tax return?

You can only expense things that you need to run your as a creator. In the words of HMRC, anything expensed needs to be ‘wholly and exclusively’ for the business. This includes Thortful fees, as well as any materials you use to create your design (like pens or a tablet).

Rather than keeping an itemised list of all your expenses, the Trading Allowance is a great benefit to take advantage of. The £1,000 trading allowance allows you to assume you’ve incurred £1,000 in expenses (even if your expenses are less than £1,000).

Using the trading allowance will likely save you hours of work preparing your tax return (and relieve you of the stress of doing something wrong – HMRC doesn’t always make things easy after all)!

When do I need to submit my tax return?

Your tax return is due each year by the 31st January, and covers all your earnings from April to April (the tax year). This means that you normally have over 9 months to prepare your tax return each year.‍

Due to COVID, HMRC has waived the late submission penalty until 28 February. The self-assessment deadline is still 31 January 2022. Any interest payments that may be charged on late payments will therefore still start from the end of January. 

Do I need to pay tax when I submit a tax return?

Not necessarily. If you earn less than the tax threshold in the UK, then you don’t need to pay any income tax or National Insurance.

If you do earn above this threshold, then you will be taxed over your income. For the last tax year (2020/21), the thresholds you want to keep in mind are:

You don’t pay income tax if you earned less than £12,500

You don’t pay National Insurance if you earned less than £9,500

You may still want to voluntarily pay National Insurance to start saving up for your state pension and state benefits like maternity leave and statutory sick pay.

How can I make this whole process easier?

HMRC doesn’t make things very easy to understand, especially if you’re busy enough with work, creating, and a social life! Using an app like Earnr can make it easier to stay on top of your income and tax return before the deadline.

Most importantly, if you’ve earned less than £3,000 as a creator in the last tax year, we’ll help you do your tax return for free! To get started, just download the Earnr app from the IOS app store.

This blog post has been prepared by Earnr and not by Thortful. The content in this blog post is of a general nature, for information purposes and should not be relied on as advice. You should seek advice from a tax professional, who will be able to advise you based on your specific circumstances.