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I run a game community which is based around Minecraft at the moment with just under 40,000 registered users and I want to expand to YouTube which is in the works and other games. We relaunched yesterday and last night we made $400 and in total we have made $712.12 as income from our store where people can obviously buy things but it has come to my attention that soon we will need to pay taxes because if I have made $400 in income in 1 night with no advertising just word of mouth then I don't want to think what advertising can bring.

With the income that the community is generating it is being put into development, server hardware, advertising etc and I am using my aunties Paypal account. I have been made aware that we will soon need to start paying some sort of tax if this much money is being generated as income and somewhat understand it would be classed as "Hobby Income" but what do we do from here because I am 15 so I can't legally pay tax... I have been told to class it as personal income, hobby income but I don't know what to do from here.

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As a minor you certainly can pay tax, the government wants its cut from you just like everyone else :-)

However you do get the personal allowance like everyone else, so you won't have to pay income tax until your net income reaches £10,800 (that's the figure for the tax year from April 2015 to April 2016, it'll probably change in future years).

Once you're 16, you will also have to pay national insurance, which is basically another tax, at a lower threshold. The current rates are £2.80/week if you are making £5,965 a year or more, and also 9% on any income above £8,060 (up to £42,385).

Your "net income" or "profits" are the income you receive minus the expenses you have to support that income. Note that the expenses must be entirely for the "business", they can't be for personal things.

The most important thing to do immediately is to start keeping accurate records. Keep a list of the income you receive and also the expenses you pay for hardware etc. Make sure you keep receipts (perhaps just electronic ones) for the expenses so you can prove they existed later.

Keep track of that net income as the year goes on and if it starts collecting at the rate you'd have to pay tax and national insurance, then make sure you also put aside enough money to pay for those when the bill comes.

There's some good general advice on the Government's website here: https://www.gov.uk/working-for-yourself/what-you-need-to-do

In short, as well as keeping records, you should register with the tax office, HMRC, as a "sole trader". This should be something that anyone can do whatever their age, but it's worth calling them up as soon as you can to check and find out if there are any other issues.

They'll probably want you to send in tax returns containing the details of your income and expenses. If you're making enough money it may be worth paying an accountant to do this for you.

  • How can I pay taxes if I don't have a Tax ID or anything like that? – Luke199 May 4 '15 at 18:38
  • You do not have to pay National Insurance until you are 16 years old, regardless of how much you earn. – Brendon May 4 '15 at 19:22
  • @Brendon: oh, I hadn't realised that, thanks - I've edited my answer. – Ganesh Sittampalam May 4 '15 at 19:36
  • @Luke199: HMRC will probably allocate you a reference number when you register with them. – Ganesh Sittampalam May 4 '15 at 19:36
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    @Luke199 if you follow the link in the answer you'll see that it shows you how to register as self employed with HMRC. Once you do that they'll set you up to submit self assessment tax returns detailing your income from which any tax due will be calculated. – Nigel Harper May 4 '15 at 20:08

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