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I'm a comic artist in the UK. I earn money from my website, 3rd party merchandise sales and commissions. I've recently been commissioned to draw illustrations for an international magazine. They want my VAT number and other details so they can pay me online. I don't earn much money so I've never registered for VAT. Can they pay me without a VAT number? Do I need to register my business? Do I need to pay tax?

I'm lost so if anyone could help, I'd be very appreciative.

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Yes, they can pay you without a VAT number. Just tell them that you're not VAT-registered, and send them the normal details (bank account and sort code, or address to send a cheque to).

If you earn over £10,000 in any tax year, and are resident in the UK, you must pay tax.
If you earn over £81,000, you must register for VAT.

Registering for VAT means you receive a VAT registration number, and then charge your customers VAT on their purchases, but can reclaim VAT on goods and services you purchase.

You can register for VAT voluntarily even if you don't meet the threshold, but this is generally a bad idea for businesses that mostly involve selling stuff to small companies or individuals.

Read more about income tax on the HMRC website.

  • A clarification on the voluntary VAT registration; it may make sense if the majority of your income comes from companies outside of the UK whilst your expenses are mainly paid to companies in the UK. If you think it may make sense, check with your accountant. – Chris Jan 16 '15 at 13:27
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As Chris said in the comment, speak to an accountant about whether it's worthwhile for you to register. Unless your turnover is above the VAT registration threshold of £85,000 (not £81k) or you purchase a lot of equipment (or a few pieces of expensive equipment), it likely won't be worthwhile.

You do need to register your business with HRMC and pay tax on all business income. Unless you set up a limited company (speak to an accountant about this), you'll be a 'sole trader'.

Before you invoice your client, check:

  1. The bank account they will pay into is able to accept payments in a foreign currency,
  2. How much the bank will charge you (and they will) for accepting a foreign currency payment,
  3. What currency exchange rate the client must use. (If you don't set this, you could lose out: $100 could be worth £130 today, but £120 tomorrow), and
  4. Whether using a currency transfer company will charge you less than your bank for this service.

If you haven't already, add into your contract that there is an extra fee for payment in non-sterling currencies to cover the extra fees, and the client must pay for any shortfall in payment due to exchange rates changing.

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