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People turning their passions into businesses has been one of the defining characteristics of the UK’s recent surge in self-employment, and nowhere is this more true than in the world of blogging.
Blogging, for the uninitiated, is a form of digital self-publishing on just about any topic. Lifestyle blogs cover people’s social comings and goings, fashion blogs document outfit choices, food blogs record gastronomic adventures, and travel blogs serve as a public scrapbook for avid tourists and backpackers.
With free WordPress websites and YouTube channels able to be set up in seconds, barriers to entry into the blogging world are non-existent. Pick up a camera or sit down at a keyboard and you’re ready to go – all that’s required to be successful is a bit of expertise or personality.
Blogging is so pervasive you can’t swing a cat without hitting someone running their own publication. Even under our own roof Kim has a testing blog, Claire has a food site (which led to her running the food pages of our local newspaper), I write about content strategy, Alice writes about books – and that’s just the people that sit within five metres of me.
Individual reasons for entering the blogosphere are as diverse as the topics covered in the blogs themselves. John Adams, who blogs about fatherhood at Dad Blog UK, initially started his blog as a way to document the challenges of being a stay-at-home Dad, and quickly realised he was on to something.
“My wife and I decided we needed to change our lifestyle. Our daughter was in nursery full time and we weren’t happy with this. Having had a number of negative experiences in which people questioned whether a father could care for their child as well as a mother, I started a blog.”
Louise George, who blogs at Bodhi Babes, is perhaps typical of many bloggers. What started as a hobby grew into a fledgling enterprise.
“Initially it was a creative outlet and space to inspire other women… I had no idea if anyone would read it apart from my Mum – she’s still my biggest fan! Quite quickly the blog took on a life of its own. I absolutely love writing and am so grateful others have resonated with my blog.”
Blogging – especially its younger sibling video blogging (or vlogging) – is big business. The world’s most-subscribed vlogger – PewDiePie – has more YouTube subscribers than YouTube itself (over 38 million at the time of writing), and at any time the leaderboard of most-subscribed YouTube channels is littered with videogame, comedy, beauty and lifestyle vloggers from around the world.
It’s not just the audiences that are huge. There’s an awful lot of money to be made if you get big. PewDiePie reported he took home around £4.5 million in 2014 (which is just a percentage of his total revenue – YouTube and Maker Studios, his employer, both take a cut first), and beauty bloggers regularly command five figure sums for collaborations with big brands.
One of the most popular lifestyle and beauty bloggers, Zoella, reportedly earns upwards of £20,000 per month in advertising revenue, outsold JK Rowling when her novel debuted, and recently snapped up a £1 million property in Brighton.
Several popular bloggers have even been able to parlay their online popularity into successful lifestyle brands. Ree Drummond – known as The Pioneer Woman – began blogging in 2006, and has built a successful personal brand in the US that includes best-selling books, a TV cooking show, and even sold the rights to her biography to Columbia Pictures.
Blogging is still a nascent form of business ownership, but its popularity is exploding due to these high-profile success stories. The number of people searching for information on how to become a professional blogger has never been higher.
Although few will reach the dizzying earnings Zoella and PewDiePie enjoy, there are many ways to make a good income from blogging. Aside from straightforward advertising and affiliate links, many bloggers use their website and associated audience to raise their profile to open the door to other money-making opportunities.
John Adams of Dad Blog UK was invited to Downing Street within months of starting his site, and used his increasing profile to source more writing work, while Louise George uses Bodhi Babes as a home for her workshops and professional coaching.
Just like the topics covered, how bloggers and vloggers monetise their audiences is a complex picture.
As with many businesses born from personal passion, the “business” bit often gets left behind in the excitement of a new venture. The thrill of the first promotional deal, the rush when your advertising revenue exceeds your income from your 9-to-5; before you know it you’re running a successful business from the desk in your bedroom without having registered as self-employed or knowing the first thing about your tax obligations.
How you decide to run your blog can have a big difference on when you become a business in the eyes of HMRC.
If you’re on the receiving end of payment for any activity – a paid post or link, product placement, attending an event or vanilla advertising – you are instantly a business as far as the tax man is concerned. Time to register as a sole trader and put aside a chunk of that cash to settle your tax bill when you file your Self Assessment.
If, like many bloggers, you decide to take payment in return for physical products or experiences (you’re given a free gadget in exchange for a review, or a free ticket to an event in exchange for a mention on Instagram, for instance), the delineation between hobby and business gets a little blurrier, as do your finances – how do you deduct Income Tax from a free lipstick?
The answer is all to do with your intent or, as HMRC calls it, your badge of trade. And, as you’d expect from the people that brought you VAT, IR35 and National Insurance, it’s really complicated.
If you’re deemed to have a badge of trade you’re operating a business, no matter how much you insist it’s just a hobby. Factors that can influence your badge of trade include the frequency of your transactions, whether or not your transactions look and feel like those of registered business (if it looks like a duck and quacks like a duck etc.), and why the transaction happened in the first place.
If a fashion blogger is sent a new wardrobe by a popular retailer whenever a new range is released and they in turn give their new threads plenty of coverage, there’s a good chance HMRC would deem that transaction a commercial trade. There’s an exchange of value – clothes for advertising – an expectation from both parties, and it’s happening regularly. In HMRC’s eyes it’s not much different from someone buying a sandwich. Just because the transaction isn’t happening in cash it doesn’t mean it’s not taxable.
Once you’re through with the tricky business of figuring out if you have a badge of trade, how you’re taxed is actually surprisingly straightforward. A blogger’s revenue would simply be the combined retail value of all the goods and services they received. Subtract their allowable expenses and the remainder would be their taxable income.
This has the potential to create a tricky scenario where a professional blogger has received thousands of pounds in freebies but no cash income, leaving them with a big tax bill and no way to settle it. So if you’re thinking of diving into the blogging business, make sure you have a cash balance large enough to cover your tax.
Governments are famously slow at adapting to new business trends – just look at how long it took HMRC to respond to crowdfunding and bitcoin. To their credit the Advertising Standards Authority has already issued guidance on how bloggers and vloggers should disclose commercial relationships in their content, but HMRC hasn’t showed any signs of updating taxation rules for people who are paid in good and experiences.
In the meantime the best course of actions for those making a living self-publishing is simple: keep your blogging strictly as a hobby, or get paid in cash.
Over the last few months of 2017 and the whole of January, client managers are busy reminding people of upcoming deadlines and things they’ll need to do to make it easy for them to keep on top of their Self Assessments.