Google Adsense is the most popular monetisation program on the internet today. It allows the owners of website, blogs, apps and other electronic media to earn money by placing adverts in strategic places. Every time an advert is clicked, Google pays a percentage commission to the affiliate. As a result, you’ll need to pay tax on Google Adsense commission.
I’ve previously written a successful article about paying tax from Amazon Associates earnings. Just like that program, if you live in the UK and are a UK taxpayer, and you earn money from Google Adsense, you’ll have a legal obligation to declare and pay tax on Google Adsense commission. This is regardless of how much (or how little) you earn from the program.
Commission – just like any other form of earnings income – it subject to Income Tax being paid where required.
I earn under my taxable income – do I still have to declare earnings from Google Adsense?
Yes. Even if you were to earn £20 in a year from Google, you’d still need to declare it to HMRC; even if you have earned under your annual taxable income.
The majority of people in the UK are currently provided the tax code 1100L, meaning that they can earn £11,000 before paying any income tax on their earnings (whether from PAYE or Self Assessment).
You might think £100 is not worth declaring, but you should always speak to HMRC if you are in any doubt. They may not require you to complete a tax return for a nominal amount but never assume.
I have a full time job that I’m paid monthly for. Do I still need to pay tax on Google Adsense commission?
Yes, you do. Just because you already pay PAYE or Self Assessment on a another job, doesn’t mean that you’re exempt from paying Income Tax on any other form of earnings.
How do I declare my earnings from Google Adsense?
You should keep a record of all earnings from any online programs that you earn money from. In my case I keep a simple Excel spreadsheet and record the date of the payment, from which company, and how much I received. I also keep a copy of the email confirmation which is sent from Google confirming how much I was paid.
If you are a Sole Trader, you’ll need to register as Self Employed with Her Majesty’s Revenue and Customs (HMRC) and complete an annual tax return. If you are already a business, you’ll need to declare the earnings just like any other form of income.
You may wish to employ an accountant to complete your annual Tax Return for you. A good accountant will explain what you need to do and will usually charge between £100 and £200 per year to complete and submit your tax return.
What about National Insurance Contributions
Again, regardless of how much you earn, you may need to pay National Insurance Contributes (NIC).
However, some people may be exempt from paying NIC on small earnings. At the time of writing, the small earning threshold was £5965 [more info here].
The benefits of properly declaring and paying tax on your Google Adsense commission
There are a number of benefits of correctly declaring and paying the tax you owe. These include:
- you are abiding by the law
- you won’t be fined or prosecuted
- you contribute to a fair society
- you can claim any expenses relevant to your business, such as the cost of website hosting or software purchases required for you to go about your business
The penalties for failing to declare and pay tax on Google Adsense commission
There are penalties those who fail to declare and then pay tax on Google Adsense commission and you can be fined with interested added to any undeclared earnings. You could even be prosecuted or imprisoned.
HMRC employs many different methods to track down tax avoiders, including sophisticate software and checking of Googles accounts.
Learn more about Google Adsense
I recommend you read the book ‘How to make profit from Google Adsense‘ if you’re new to the program.