Digital or Affiliate Marketing, whichever you choose, is your Business. It’s not a fiddle where you can stash all the rewards and live the good life. You will be required to keep records and pay Taxes and N.i. on your profits.
So, here’s a breakdown of what actions you will have to take.
As much as you listen to those on the social platforms, i.e. TikTok, tell you it’s all easy peasy, let me just stop you right now.
When you start selling products and services, you are creating an income and this is subject to all the rules and regulations pertaining to a Business.
There’s a lot to consider. You’ll be liable for Tax and N.I. Exceed £90,000 and you’ll have to register for VAT.
You may well consider a private pension, contributions are tax deductible along with the costs of running the business.
You have to ‘keep the books’. You must record your sales and purchases, so keep all receipts (digital is OK for HMRC)
Free samples: These are classed as income if they are given to be promoted – Include in your income at a fair market value.
I do know that TikTok does include the value of samples in your earnings.
Here’s a timetable that will help you keep track of how your business is running and you are meeting the targets for submissions to HMRC
I’ve also given you some templates you can use to record your trading and accounts.
Before You Start Trading
- Register as a Sole Trader with HMRC
- Do this as soon as you start earning self-employed income (or expect to).
- You must register by 5 October after the end of the tax year in which you started trading.
- Example: If you start in July 2025 → register by 5 October 2026.
- Set up bookkeeping
- Keep income & expenses tracked (spreadsheets or accounting software).
- Open a separate bank account for clarity.
- Consider insurance & pensions
- Public liability / professional indemnity (optional but wise).
- Start a private pension scheme if desired (contributions are tax-deductible).
Throughout the Year (6 April – 5 April)
- Record income
- Sales of digital products.
- Affiliate commissions.
- Free samples (if given in exchange for promotion → record fair market value).
- Record expenses
- Hosting, software, subscriptions, payment fees, advertising, home office %, etc.
- Set aside money for tax
- A good rule is 20–30% of profits.
- This covers Income Tax + Class 2 & Class 4 NICs.
- Check VAT status
- If turnover hits £90,000 in a rolling 12 months, you must register.
- For EU digital sales, check if OSS (One Stop Shop) registration is required.
Key Deadlines
Tax Year Runs: 6 April – 5 April
- 5 October (after your first tax year)
- Deadline to register as self-employed with HMRC.
- 31 January (after tax year end)
- Online Self Assessment filing deadline.
- Pay Income Tax, Class 2 NICs, Class 4 NICs.
- Also pay the first “payment on account” (an advance towards next year’s tax bill, if applicable).
- 31 July (same year)
- Pay the second “payment on account” (if applicable).
Example Timeline (if you start in July 2025)
- By 5 April 2026 → Keep full records of 2025/26 income & expenses.
- By 5 October 2026 → Register as self-employed with HMRC.
- By 31 January 2027 → File 2025/26 Self Assessment + pay tax & NICs + 1st payment on account.
- By 31 July 2027 → Pay 2nd payment on account (if required).
✅ Quick Checklist Recap
- Register with HMRC by 5 Oct.
- Keep records year-round.
- Set aside tax money.
- File Self Assessment by 31 Jan.
- Pay NICs & Income Tax.
- Watch VAT thresholds.
Here’s your printable UK Sole Trader Tax & Compliance Checklist (PDF):
📄 Download UK_Sole_Trader_Checklist.pdf
Would you like me to also make a version formatted like a calendar timeline (month-by-month across the tax year), so you can see deadlines in chronological order?
Got it 👍 — you now have the PDF checklist ready to keep you on track.
Now let me show you some tips for keeping records efficiently (e.g. simple bookkeeping methods, apps, or even spreadsheet templates) so you don’t get caught out at tax return time?
Perfect — keeping clean records makes your tax return much easier (and saves you stress if HMRC ever checks your books).
Here are practical options for UK sole traders:
Simple Record-Keeping Options
1. Spreadsheets (Good for Beginners)
- Use Excel or Google Sheets.
- Keep two tabs:
- Income → date, source (e.g. “Etsy sale” / “Affiliate payout”), amount, invoice/ref #.
- Expenses → date, category (hosting, advertising, software), amount, receipt ref.
- Add formulas for totals and net profit.
- Advantages: free, simple, works if your business is small.
2. Bookkeeping Apps (More Automated)
- Free / low-cost tools:
- Wave Accounting (free, but not UK VAT-ready).
- Zoho Books (cheap, MTD compliant).
- UK-focused tools (Making Tax Digital ready):
- QuickBooks Self-Employed
- Xero
- FreeAgent (free if you bank with NatWest, RBS, or Mettle).
Benefits:
✔ Link your bank account → transactions auto-import.
✔ Upload receipts by photo.
✔ Generates VAT and Self Assessment reports.
3. Receipt & Invoice Tracking
- Always save digital copies of receipts/invoices (HMRC accepts scans/photos).
- Tools like Expensify, Dext, or even just Google Drive/Dropbox folders by year/month.
4. Practical Habits
- Set aside 10–15 minutes each week to log income/expenses.
- Use a separate business bank account — makes reconciling easier.
- Tag transactions (e.g. “advertising”, “software”, “home office”).
- At year-end, you’ll just pull totals straight into your Self Assessment.
What HMRC Expects
- Keep records for at least 5 years after 31 January submission deadline.
- Must be accurate enough to justify your return.
- Digital record-keeping will become mandatory under Making Tax Digital (MTD) — April 2026 if turnover is £50,000, April 2027 if £30,000.
Here’s your UK Sole Trader Bookkeeping Spreadsheet Template (Excel format):
📊 Download UK_Sole_Trader_Bookkeeping_Template_With_Totals.xlsx
Features added:
- Income & Expenses sheets: each has a running Total formula.
- Summary sheet: automatically shows
- Total Income (£)
- Total Expenses (£)
- Net Profit (£)
All set!
I’ve added a Monthly Summary (UK tax year: Apr–Mar) that auto-calculates income, expenses, and net profit per month.
📈 Download UK_Sole_Trader_Bookkeeping_Template_Monthly.xlsx
What’s inside:
- Income & Expenses sheets with a hidden helper column that tags each row by month (YYYY-MM) and totals at the bottom.
- Summary sheet with overall totals and net profit.
- Monthly Summary sheet that:
- Derives the current tax year start automatically.
- Shows Apr → March rows with formulas pulling monthly totals via SUMIFS.
- Calculates Net Profit per month.
Now you’ve got a UK-specific tax checklist and a bookkeeping system with monthly tracking, you’ll be well set up to stay compliant and keep things stress-free at tax time.
If there’s anything you’re not sure about, please contact me so I can assist you.