Anyone a CPA affiliate from the United Kingdom???

I'm in the UK and promoguy is correct.

It's for this reason that I'm setting up a limited company for my online marketing. My day job already puts me well into the 40% tax bracket, so this seemed the most sensible option to me.

I think running your affiliate income through a limited company means that you only pay tax on any PROFIT. So if you grossed $10,000 one month, but actually spent $11,000 on adspend (ouch!) then you wouldn't have to pay any tax because you've made no profit.

Another benefit of having your own company is that you can choose to become VAT registered (you have to if your turnover is more than about £68k). Thus you can claim back the VAT on anything you buy for your business. So, if you need some new computer equipment, just make sure you buy it through your company and you can claim back the VAT - which is not an insignificant amount in the UK.

Registering a company is pretty straightforward. Set up a business bank account. Get a business credit card for all your adspend (also try and get one that gives you good points or cashback. My Amex for example gives me 1% on all spend, so if I spend £10k in a month on advertising, I get £100 cashback).

See an accountant though, not only to start up but also as an ongoing concern to keep your books in order, submit tax forms, etc...

Disclaimer: I'm not a tax accountant, so the above is only my understanding of it (which could be completely incorrect), so don't cite this post if you get done for tax evasion! lol.

I was just digging around on HM Revenue & Customs: Home Page

I notice they run local courses on numerous topics, including setting up a LLC. I think I'm going to pop along (because I haven't actually registered my company yet, but need to soon).

PLEASE NOTE: I AM NOT AN ACCOUNTANT AND YOU SHOULD ALWAYS SPEAK TO ONE BEFORE DOING ANYTHING FINANCIAL! THIS IS ADVICE GIVEN BASED ON MY OWN PRIVATE CIRCUMSTANCES AND EXPERIENCE AND IS NOT PROFESSIONAL ADVICE AND AS SUCH I ACCEPT NO LIABILITY FOR ANYTHING YOU TRY BASED ON THE FOLLOWING!!!

Hey Promo Guy,

Sorry - - not quite correct.

As a Director of a company, you can take all the money as a dividend if you wanted to - but there is no faster way of inducing the Revenue to inspect your books than that!

The sensible thing to do is:-

Pay yourself and your Company Secretary a wage. (As a limited company, you have shares issued. You cannot allocate all the shares to just one person! So, in my case, my wife is the Company Secretary and holds 10% of the shares - I hold the other 90%. You can make anyone the Co Sec, doesn't have to be a relation etc.)

Pay yourself a 'sensible wage' that keeps your majority earnings below the Higher Rate threshold.

Pay your Company Sec as much of a wage as possible depending on their circumstance. In our case, I pay enough to max out my wife's lower tax rate - saving us tax money!

You now have a visible and sensible wage - revenue man has nothing to ponder on or investigate.

You can now take the remaining profit (profit only!!) from the company as a dividend and you end up paying tax at 19% on that amount - not 40% for the higher rate tax band! (Make sure you save the amount payable of 19% tax to a seperate account each month as you need to pay it in two installements the next financial year!)

Naturally, you need to deduct your costs from the company prior to paying a dividend to ensure you only take dividends from net profit. Take from anywhere else and THAT is where you are deemed as taking a Directors Loan - which has to be paid back again!

This is what i do - to the extent that i take out £XX,000.00 every month - of which only £1,652.45 is wages - the rest is all dividend at 19%!!!!

HTH

Rufus

Again, this is just my opinion, but I would say limited company.

Remember that the debts of a sole trader extend into his personal assets too, whereas with a limited company, any debts are limited to the company itself (hence the name).

Therefore, have a bad weekend on Adwords, lose $20k on a campaign, and if you are a sole trader and don't have the capital to absorb it, your credit card company could come after your car, house, etc... to repay the debt.

So when you asked the question, had you already made up your mind...

Sole trader is cool. You basically just start trading, but make sure you tell HMRC within 3 months or you risk a fine.

No further advice at this point. I'm pretty much at the same point as you, although I'm swaying towards the Limited Company side of things...

Let us know how you get on.

Sorry - neglected to check back on this thread (D'oh)

Corporation tax (21%) is taken out before you take the dividend - so if you earn 10,000 - pay you and your company sec a total of 2,000, you then deduct 21% of 8,000 (1,680) and you have 6,320 as a dividend to share.

NB1 - you'll also have such things as deprecation to factor in as a monthly deduction - spk to an accountant for the full list!

NB2 - Open a seperate bank account, ( i find an online account gives the best % interest) and move your corporation tax money saved each month into it. You'll earn the interest on it better than a business account. Make sure when you come to pay the corp tax in Jan the next year that you transfer the money back to yur business account and write the cheque from that account! Declare any interest earnt from this account on next years turnover!

NB3 - You should also save the personal tax amount each month to the same saving account. Doubles your interest which works for you!!

Again - these are just my thoughts and experience - always check with an accountant first - in case I have it wrong! :rolleyes:

HTH

Rufus

Sounds good. I'm not near Dorset though. I flit between Reading and Derbyshire each week.