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I'm operating a web-based service in the UK where I receive a commission every time a customer makes a sale through my service.

What is the best way to structure a business or record income personally to pay the least amount of tax possible? I'm in the UK.

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This is straying a bit from Personal Finance. – DJClayworth Jan 23 '12 at 17:20
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@DJClayworth I think it is on topic. If you're reading this question as "How do I set up a web-based hotel booking e-commerce system?" then I would agree it is off-topic, but I read this question as "What is the correct way for me to structure things so I am only taxed personally on the revenue I get to keep from the arrangement?" .. then it speaks to an individual's income from a small business. See See meta.money.stackexchange.com/questions/15/… – Chris W. Rea♦ Jan 23 '12 at 20:19
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@ChrisW.Rea I rewrote the question to be more generic. – duffbeer703 Jan 24 '12 at 0:11
@duffbeer703 Hmm... with your edits, you've erased (or oversimplified) a part that I think matters: that the OP is wanting to ensure that only the income he gets to keep is taxed, as opposed to the passed-through revenue being taxed. Perhaps roll back to the OP's text, but keep your title for the question? The revenue pass-through is a key point of discussion, IMO. – Chris W. Rea♦ Jan 24 '12 at 0:40

2 Answers

up vote 1 down vote

Its best you start this venture as a Business entity. Whatever the customer pays you is your income. Whatever you pay to the hotel will be your expenses. Apart from this there will be other expenses. So essentially difference between your income and expense will be the profit of the entity and tax will be on the profit.

If you do not want to start an Business entity and pay as an individual then please add the country tag, depending on the country there may different ways to account for the funds.

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Use a limited company. Use the HMRC website for help on limited companies and get a good accountant for doing your taxes. Mixing your website income and personal income may make you pay a higher tax rate.

You can take out expenses from the limited company, which are tax deductible. But if you group it in personal income it wouldn't be tax deductible. In a personal capacity you are 100% liable if your business goes bust and you owe debt. But for a limited company you are only liable for what you own i.e %age of shares. You can take on an investor if your business booms and it is easier if you do it through a limited company rather than through a personal endeavour.

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