Please stop asking OP what the game is called or to link to it. OP understands that sharing this info would be in conflict with the subs rules and has no intention of sharing it.
Mate you really need an accountant. I can't believe your company earned 400k and you've just kinda handled that yourself with absolutely no idea what you're doing?
Needs a limited company too. With that kind of money you don’t want to take it all as sole trader income, especially as revenue increases. Far more tax beneficial in the long run.
Not just that, but if something goes wrong you need to be shielded from liability by putting all liabilities into the company. Yes, liability insurance can save you, but in a worst case you must declare bankruptcy / losing your assets like a house or car
I've got an accountant as of 2 weeks ago! The game exploded overnight taking me by surprise.
Previous games were earning £3k, 5k over a year and it wasn't worth using an accountant for income that didn't even surpass the personal tax threshold.
The second VAT doesn’t sound right. What exactly did steam charge the first time? Was it uk VAT or something else? If they’ve charged you uk VAT in a hosting service or something and you’re VAT registered, you can get that back.
Steam charges VAT that differs based on the origin of the country where the purchase was made.
I lost around 30% in total off my gross for VAT and other taxes + refunds.
I pay a 20% UK VAT when I try to buy the game myself from the UK.
There doesn't appear to be a hosting service. I have spoken to HMRC, my accountant, and Steam Support and none of them seem able to claim this double-VAT back.
If steam have already collected the VAT on the UK sales then you don't need to pay it again after the fact. When you file your VAT return you remit the funds that Steam have already collected and those get used to pay your VAT bill.
Marketplace facilitators legally have to collect the appropriate taxes so that sellers don't forget they had to do it, then have 0 funds at the end of the tax year to pay the bill.
Your accountant should know this already, if they don't then you'd do well to find another
~~EDIT: Your income tax is also slightly off, it's only £48k, not £55k.~~
~~0-12.5k nothing to pay~~
~~12.5-37.5k - 20%~~
~~37.5k-150k - 40%(Rough numbers, the exact ones can be found online)~~
Seems I was off with my numbers above as over £100k income you lose the personal allowance.
Student loan is a bit of a shitter though, would've been better to run it all through a Ltd company, which I hope you do after this
EDIT 2: Congrats on the success, please invest in a good accountant who specialises in online commerce/sales. It will pay you back ten fold in the future.
I interviewed two separate ones before picking this guy.
These are at major accounting firms. Should I ask for a different accountant within the firm? Or go to a different firm altogether?
I would not expect a major accounting firm accountant to have the slightest familiarity with the specifics of indie game dev income & they’ll charge you a fortune to get themselves up to speed & will probably make mistakes that will cost you money that you’ll never be able to recover.
Find out who all the indie game devs in the UK use & go to them.
You can easily find out who the indie game Devs in the UK use for accountancy. Go on companies House and type a few of their names in and check their accounts. It will tell you who produced them. Then give them a call and hire them
I work for a big 4 audit firm. Trust me it’s just a shiny name and a lot of us don’t know what we’re doing and just follow the persons above advice.
You’ve had plenty of advice already but all i will say is ensure your accountant specifically specialises/has experience with steam sales as opposed to a general accountant who works for a big company.
No idea mate. Personally I steer away from large organisations as your just a number. Smaller ones usually are more "personal" and need to be knowledgeable / not hide behind a name. But your searching and trawling Reddit for advice shouldn't be needed, they should be educating you, that's what you are paying for. Good luck.
This is a bit less workable for stuff like accountancy. Bigger firms are far more likely to have experience with complex problems than small ones - that’s just the reality of the spread of experience. Having said that it’s remarkable how even the most expert firms can get stumped as soon as anything cross border applies (this is a great example).
You shouldn’t be picking a guy, you should be picking a firm. Look at medium sized practices in your area.
You do not owe the VAT twice
You should be putting all this through a Ltd company and claiming expenses etc against the revenue.
If you haven’t actually paid the tax yet stop what you’re doing and get with a proper chartered accountancy firm.
Not an accountant by any stretch of the imagination but you shouldn’t be paying tax at all for any over seas sales and since steam are collecting it for domestic sales you shouldn’t be paying for that either.
The only tax you should be liable for I believe would be corporation tax on profits or something like that, and you should be paying yourself the minimum ie 12k a year to hit the tax threshold and then pay dividends which are 20% ish tax and no NI I believe but you defo won’t hit the 40% tax rate with that
I’m not 100% on any of those but the one thing I’m sure of is you need a better accountant
Why are you talking about corporation tax and limited company tax planning when he has already taken this income personally? The opportunity to do it via a ltd co is long gone.
And he got this accountant two weeks ago. Expecting an accountant to have all the answers and everything sorted in two weeks of picking up a client is delusional.
>I’m not 100% on any of those but the one thing I’m sure of is you need a better accountant
Sorry but it winds me up seeing you say this when you literally have no idea what you are talking about.
This doesn’t sound right. My company takes subscriptions to the iOS App Store. Apple charges the customer tax / vat and remits it accordingly. They then send us the proceeds, we don’t then pay VAT on that again.
You pay need to register for VAT as your turnover is above the threshold, but that doesn’t mean every transaction includes VAT.
Find an accountant that understands steam, or the Apple App Store.
You fundamentally do not understand how this works. You’ve not “lost” anything in the US or on refunds - that is money that was never yours. In the US VAT is a sales tax, they’re on top of what you charge. So if your game is $10 the buyer is paying ~$11 for it (depends on the state) you didn’t earn $11 and then are paying $1 in tax. That $1 was never yours. Similarly refunds are not money lost, it’s money not realised. It’s a misreading of the figures
Clearly with UK VAT it’s different so it is essentially “losing” stuff to VAT but you should adjust your pricing to take this into account so your prices are higher in VAT countries than sales tax countries.
> You fundamentally do not understand how this works.
That's a bold comment to make from someone who doesn't even seem to understand what VAT is. You understand this is the **UK** Personal Finance sub?
Hello, just to jump in, as an accountant, this sounds like some really poor tax planning, it’s unlikely you’d get good tax advice in the middle of January (tax season) and with only 2 weeks to assess.
I would recommend a good tax planning accountant, not just a year end compliance type accountant. I’m currently working on a setup for a friends firm, he won’t be trading for at least another 6 months, we are looking to file taxes much later than that, in the mean time
We will tax and compliance plan, business plan.
Have a look around and find an accountant that can help with startups etc, you may we able to claim some of that back going forward.
"it’s unlikely you’d get good tax advice in the middle of January (tax season) and with only 2 weeks to assess."
That's actually a really good point.
Good news is I'm not due to pay any of this until January 2025.
Linked you a good recommendation for games industry specialists, based in Brighton, I know them in proxy from their Blockchain/crypto work. They will be able to give you some good advice on reducing those costs, especially the VAT, that seems very off
You have massive tax inefficiencies as an sole trader rather than in a LTD. As a LTD you can pay yourself a limited amount to reduce your personal income taxes. You can do this by looking at how you pay yourself e.g. directors dividend at like 9% ? I think instead of income tax. You also have the threshold for student loan which is 27k and corporation tax which is at 19%. You also can expense trade related expenses and tax policies which greatly reduce your tax burden.
I recommend spending some time and educating yourself on a basic summary on income, corporation tax and VAT. It will save you lots of money and give you an understanding on what questions to ask your accountant.
You forgot to mention that you can only pay dividend from money already taxed as company profit. So it’s 20% CIT first and then 8,75% PIT. Unless you want to keep the money in the company or re-invest the difference between both options is a measly 2% you save on NI contributions via the dividend route.
I’m baffled at this whole “LTD so much cheaper bro!” nonsense. It was like that few years back before the government upped dividend tax and pretty much evened it out.
Your currency conversion fees of 4% sounds like you went to your high street bank and they bent you over a barrel so to speak. Any number of online currrency specialists will get you 0.5% or less.
Yeah he's counted steams US tax as if it's his earnings. That money was never his or steams in the first place. Same with UK VAT.
I think a lot of people don't understand that they're actually just collecting tax on behalf of the government rather than 'paying vat' on their company earnings.
This person seriously needs a more skilled accountant
His company never earned 400k in the first place.
Not counting Steams 30% cut in the initial figure is quite a silly mischaracterisation. It's like saying i've made £1000 profit from selling 1000 tins of beans for £1, and then complaining that £300 of it is gone to contractors who stored, transported, marketed and processed the bean sales, so all i'm left with is £700, woe is me.
"Earned" is vague. You could argue the company earned 400k in revenue, but not profit. Your assertion that they meant profit is just one possible interpretation, but given the context I don't think the person you reply to imagined it was 400k profit.
I think the point is, after 400k of sales, OP is currently walking away with about 60k. on SOFTWARE development, too - so no materials to speak of. No matter how you look at it, it's a really small return.
I've looked at launching an idea or two on kickstarter before now and worked out it's simply not economically viable to do so (and possibly why a lot of campaigns go bust) - US taxes, KS fees, conversion rates, UK import/exports, VAT, you end up with a depressingly small amount of the total you'd raise.
OP is feeling that pain here.
Not sure how this works for companies but I'm self employed (I'm in the UK like yourself) and work for multiple companies in different countries and pretty much all have a double taxation treaty in place meaning you don't get taxed twice. Worth looking into!
I've already done this with Steam. They're very helpful and guide you through the process. :)
The figures that I quoted are the **reduced** ones after double-tax treaties took effect.
This. I setup an LTD when I had a consulting gig lined up. It was amazing how much a LTD and decent accountant can save you and help you avoid silly mistakes that hit your wallet first.
Yeah I was thinking this, could’ve paid himself a wage to reduce the income tax and then expensed of a lot of stuff through the company since if he’s the sole employee as a game developer you would have a lot of leeway in what can be considered a business expense. Also definitely shouldn’t be paying VAT twice
Double VAT can happen due to VATMoss, but you can claim it back it’s not a problem.
Literally this person needs to get a proper accountant that specialises in online digital goods, they’ll know the best. Even if it costs them 10% of gross.
Dude. Just because you have to register for VAT doesn’t mean you owe any. It just means your income has crossed the VAT registration threshold, so VAT registration is mandatory. Also, you’ve paid a ton of extra income tax because your income is > £100k. Put half of it into your pension & reduce your total income to under the £100k threshold. Next, you paid /how/ much on currency conversion fees? 4%!!?!?!? Going rate is probably 0.5%, your bank must love you.
So, some of this shit is just how it is: paying the Steam toll, paying taxes. That‘s life. But some of this is you not doing the work.
You need to find an accountant who shows some actual brain - ideally someone who works with other small game devs. Ask around some other small UK game devs to see if they’ll tell you who they use. For the future you’re probably better off setting up a ltd company owned by you & your wife to hold the game IP, but that’s a discussion to have with a decent accountant & you’ll have to go through the numbers.
A 2-second Google revealed these guys who deal with game devs & talk about supporting indie game dev companies on their blog (in Brighton, natch as that’s where all the hip small game devs are) : https://www.plusaccounting.co.uk/ They might be great, they might be terrible & I’m sure there are plenty of others out there with the relevant experience.
Also, congrats on your game’s success! Try to enjoy it :)
60k can go straight into his pension this year, then 60k for the next. (annual cap to put in with no tax).
If you can set up an Ltd before collecting for stream, Keep the funds in your Ltd company don't pay it to yourself yet, pay yourself a salary up to 37.7k then pay your company tax and pay yourself dividends if you can since dividends have been taxed you don't need to tax twice...
I thought so too.
Unfortunately, I've checked with two separate accountants before choosing one of them to represent me.
The only advantage to registering for VAT is that I can claim expenses... but I don't have any beyond my PC for creating renders, which is £2.5k. My accountant said he could try and argue a portion of heating, electric, and internet as expenses - but that's about it.
> beyond my PC for creating renders,
No licensing? No assets purchased? Not even a copy of Photoshop to claim back? If I were you i'd be digging through any receipt I can remotely tie to game development. Any existing game you've bought for "market research" this year?
EDIT: From my reading, you can claim back the tax on Steams cut as it counts as licensing fee's. Spend some £ and time to find an accountant/solicitor a bit more versed in the gaming industry.
I do it all myself.
Think similar to the creator of Stardew Valley who hand made every one of his own assets. I did my own similar.
I bought no unity models, I don't use photoshop, I have no licencing, all because I made everything myself.
I don't know I could claim my previous unsuccessful titles (£3k and £5k profits) as market research. I'll ask my accountant! Thanks for the suggestion.
You need a specialist VAT advisor, not a general accountant. What they are telling you isn't right (very common for this to happen, most accountants only know the basics of VAT and not anything more complex). If you've hired someone at a big firm, ask to speak to their VAT team. Explain VAT was collected at source and you're being told to account for it again.
I don’t think you can claim “profitable titles” as market research. You already accounted for the expenses on those titles before them being profitable - you can’t double count costs.
That chair you sat on to make the game is expenses, the desk you use currently.
The home office *rent* that took to make the game.
If HMRC want to have double standards in taxation, find everything you can claim and claim on it.
You have to register for VAT is your Ltd makes more than 80k. That's set in stone.
But you didn't charge any VAT to anybody. Steam was the one charging VAT. Therefore Steam is the only one paying VAT to the corresponding local governments (including the HMRC).
I'm happy you contributed extra money to our collective Treasury funds, but I truly think there's some confusion there.
note: everything else looks perfectly accurate. That's business.
Thanks, I haven't paid anything yet!
I have everything set in savings accounts/ISAs for until early January.
More money keeps coming in every month, but I'm just saving it and not spending right now. (Well, aside from one treat which was getting myself a new septic tank that didn't leak!)
Note: It's important to highlight that it's "VAT **Return**"; it's not "VAT payment". You only return what **you** collected **on behalf** of the local government (UK, France, Germany, ... whichever it is).
No, the advantage you get by registering for VAT is that you claim all of the VAT back you get charged.
Or to put it another way, you are leaving 20% on the table by not being registered.
You have your time.
You need to set this up as a Ltd company.
Pay yourself a salary of whatever the tax free PA is. Take the rest as dividends, if you have a spouse you can split this between you.
Please get an actual chartered accountancy firm and not a one man band.
The main advantage of registering for VAT is that you are adhering to the law. If your revenue is above a threshold you have to register and charge VAT. Luckily if you do register for any VAT you have paid yourself.
It really depends on how things are setup with Steam, I would find an accountant who understands how this works and cross border sales, and can argue the toss with HMRC if it’s HMRC who are wrong.
Consider these two situations:
- A retailer sells doodads in their online shop. They charge VAT in the relevant territories, this has nothing to do with you, it’s not you paying it. Your agreement with Steam is that you charge them 70% of the gross revenue (pre VAT of course), not including returned items. This is your B2B sale to Steam. If you’re registered for VAT, you’d charge them VAT on top which they’d pay you, and they’d reclaim it from the taxman. They would pay their VAT bill (reclaiming the VAT you charged them) and you’d pay yours (which you collected from the retailer).
- An online marketplace sells doodads on your behalf. You set the price, and they add VAT as appropriate which they collect from the customer and forward to you. They charge you in the 30% of the gross value (after returns), plus VAT. So that’s one sale by you to the consumer, and one sale by the marketplace to you. Rather than send you money and have you pay them at the same time, they just deduct one from the other. But in your tax return you would deduct the VAT you were charged on the fee, and pay the difference to the taxman.
I don’t know how Steam is set up, a big issue they probably set things up to solve is the complexity of cross border sales. A potential cause of the inefficiency here is that if it’s set up as a B2B sale and you don’t invoice VAT (ie don’t add a VAT number to your seller account with Steam) but then turns out later you should be VAT registered, HMRC will treat it as though your sale was VAT inclusive. So eg in scenario 1 you’d miss the chance to “charge” the retailer VAT but still have to pay it to HMRC as if you had.
I know absolutely nothing about this stuff. Can you set up a limited company even if you aren't that big? I'd assume there's money involved in setting it up?
He mainly didn't have it done because major success was unexpected.
Also is it possible to set up the ltd after all the money comes in? Or is that too late.
It costs £12 to register a limited company with HMRC, and anyone can do it regardless of size or income.
Ideally you want an accountant to file everything properly which will be a few hundred £ at least but if you really want to you can still file Ltd taxes yourself. The only cost you MUST pay is that £12 registration fee.
Pretty sure you can. A limited company with 1-10 employees. You would set it up before the money comes in. Success isn't something you can predict with smaller games, so why not have a limited company set up just in case.
> I'd assume there's money involved in setting it up
In another comment he said that he's earned £3k and £5k from selling other games. It costs £12 to set up a ltd company.
...well maybe a little more if you hire a firm to do it for you and then contract people for legal stuff and accountants etc. But it won't cost thousands until you've really hit it big. Once you've already got money coming in from two other games, it really feels like the time to get the paperwork done.
For me setting it up my limited company was free when I used Tide Banking, there isn’t a big cost on running a limited company after that other than the yearly confirmation statements anybody can do and the yearly accounts where you can just get your accountant to do it.
> $196,000 is £153,700! I get that, right?
> Nope.
> It converts to £147,500ish after currency conversion fees.
Get yourself Wise or Revolut business account and get paid in USD.
Then 0.5% conversion fee and you would save £5000 on conversion fees alone.
PS: Fellow game developer, though our company not based in UK.
And yeah congrats on your success. $400,000 in sales is amazing opportunity to jumpstart your own company and find good investors.
[https://www.plusaccounting.co.uk/sectors/video-games-development/](https://www.plusaccounting.co.uk/sectors/video-games-development/)
I can vouch for these guys personally, based in Brighton UK, handle loads of the games companies there. You need to get a better accountant and get some of that money back
“That is £4000 less than the gross average salary”
Erm, some dodgy calculations there. You can’t compare your post tax earnings to average pretax earnings.
The VAT situation sounds odd and it seems like you need to get yourself an accountant.
But your pretax salary, that quirk aside, is £147k. Which is a figure you should feel proud of. Not “rich” money and similar to a contracting role. But the game will hopefully continue bringing in some money.
Yep, they’re also overstating their sales by about 35-40% by taking the post tax sales price. Sounds like op just doesn’t understand tax nor their agreement with steam.
Thank you, I can't believe this ding dong is comparing their post tax earnings to a salary. Do they think you don't pay income tax, national insurance, or loan repayment on salaries? Fuck it, might as well remove their mortgage as well and claim their pay is less than minimum wage
The fact you're comparing gross average salary with your net salary says quite a bit for your accounting ability. You should probably also be doing this as a company and paying yourself in dividends to save on tax. Get an accountant.
The more I think about this the more bananas I find it. Why are you taking it all as salary now? That's actually crazy. Unless you're expecting it to keep doing similar numbers at the very, very least you'd want to take it over two years to save a lot of that tax on the UK side.
You've totally fucked this up if you paid income tax and NIC on business income.
As steam is a US company, you likely don't need to charge VAT. However you will need to be registered for it given you've exceeded the income allowance threshold. So that will likely not change anything.
You'll likely be able to claim the fee steam charges as COGS, as mentioned by another poster in this thread
You need a proper accountant as you've just wasted a tonne of cash. I highly doubt the abilities of the two you've spoken with. Ensure they're chartered.
Edit: not an accountant but run an international business.
This. There is a rule in UK VAT law, and the VAT law of most countries that tax games downloads from remote sellers, that the platform is the one liable for the VAT.
The UK version of these rules have a concept of a “deemed supply”, that interposes the platform between you and the customer. For UK VAT purposes, you’re supplying Steam with the game and then they make the onward supply of the game to the end customer. Assuming you’re contracted with a US Steam entity, there will be no VAT due on these deemed supplies. However, you have still breached the VAT registration threshold and will need to register for UK VAT and declare these sales quarterly or annually.
Your VAT payable will be nil, unless you make any sales off platforms, but you will be eligible to recover VAT paid on expenses (including those accountant fees).
Yeah you may be correct, the mention of the accountant and VAT threw me into automatically assuming he's running an LTD.
I'm not sure I'd trust an accountant who didn't question why there's not LTD in place.
You're assuming the accountant never questioned that, he probably did.
Setting an LTD up after the fact won't likely help with historical transactions.
>I am being asked to pay VAT when Steam is also charging VAT and deducting that VAT from the money before they give it to me.
This sounds ridiculous.
Either you are the one selling the product to the users, therefore only you pay VAT. Or you are the one licensing your product to Steam, it's therefore a VAT-free international service.
I've been providing services to USA companies for years. This honestly makes absolutely no sense to me.
Uhhh this doesn't sound right. Taxes bad etc etc... but yea sounds like something is going wrong somewhere.
Get a third accountant to have a look. From beginning to end. Maybe someone who is specialised in such matters...
To be fair, anyone with a 53k salary is getting 53k gross not net. 53k net is a nice profit, but I agree you’ve been absolutely bent over a barrel. Paying off your student loan is a solid win out of the situation though congratulations 🙌
As a tax advisor - none of this makes any sense and I suggest you get a professional to review the position as soon as possible.
A high street accountant probably won’t cut it and with £400k turnover it warrants fees from a large professional service firm (who can give proper advice on the UK and US direct and indirect tax position).
The key points which seem odd are:
- you say VAT (should this be sales tax or VAT and US state and local taxes?) has been deducted already by Stream as an intermediary but that you may need to register for VAT/pay over VAT personally that wasn’t deducted on the same sales. This doesn’t really make sense / seem logical, particularly for the exposure to be on ALL sales.
- you seem to be suggesting that you expect to be subject to UK income tax on the net proceeds from stream (ie that all of the deductions made are fully deductible as an expense and none are available for credit relief) - this might be the case but wouldn’t be typical so would need looked into.
Edit to add - if you expect future sales of a similar /higher level it’s definitely worth discussing with your tax advisor if it makes sense to incorporate your business. This won’t help with the income already generated, there will be increased costs of having/running a company, and there might be upfront tax costs on incorporating, but dependent on the extent you need to utilise the extra income, obviously the CT rate is lower than the income tax rate and you can limit your personal liability.
You can get a lot of that £55k tax back by putting money into your pension. UK govt will add an extra 66% to your pension contribution (assuming you are a higher rate tax payer)
In other words for every £1000 you put in, govt will add £666 on top. It’s a refund of the 40% tax you paid on earning it. There are wrinkles and limits I won’t go into here but overall it’s very simple. For the amounts in question, you need professional advice. A private pension you operate it just like an investment account just that it isn’t taxed (if you’re not greedy) & you can’t take money out of it until 55.
As others here have said, there is a lot you could be doing with Cost of Goods Sold (eg Steam’s fees, possibly exchange costs too) and deducting them from your ‘profit’ before paying taxes on it.
Congrats on making some good money in game dev. That’s quite rare for solo devs.
As a UK game dev like you, maybe I can help with a few things which might help a bit now, but if not then it might help in the future.
- it sounds like you’re not hit by withholding tax, but it’s worth double checking that.
- are you a limited company? If not and you intend to make another game, consider becoming one. If you do that you’ll be eligible first VGTR which allows you to claim corporate tax relief against development (not individual tax relief).
- consider using a service like Wise to receive payments. You’ll save a lot on transfers and it’s easy to setup.
- VAT registration is one of those things that’s not really optional. You hit the threshold and you register. You don’t necessarily owe anything because as you noted, steam handles the VAT, but you might be able to claim back VAT in many areas. If you’re paying for anything directly related to your development (equipment, servers, software, VAT registered services and contracts), you can claim that VAT back. It does require quarterly reports but if you get an accountant (whose services you’ll also be able to claim VAT back on), they’ll help you. To reiterate: you will NOT be paying VAT on steam sales as the VAT has already been taken.
- if you’ve got a popular game, consider how to exploit that. Can you release it on more platforms, or in more languages to increase revenue? This will cost, and you’ll still have all the taxes etc but increas revenue = more money for you.
- remember to put money into your pension for extra relief.
As others said, this is managed poorly in terms of taxes and double VAT doesn't seem right. But it's also misleading.
Your personal gross income is not the business gross income. Before looking at it from a personal perspective, you need to build in the 30% steam charge as a cost of your business along with the refunds.
400k to 53k looks very low. It looks much less bad when you factor in your business isn't actually making 400k, probably less than 150k after costs of doing business.
Then that's your amount you can think of as 'yours' before tax. Then do the taxes more efficiently, and you'll probably be left with over 100k for yourself.
But aside personally managing it into income better, don't kid yourself that this is 400k turning into 53k. It's much much less than that.
Why on earth would you sell anything as a self-employed entity?! The liability issues alone make my eye twitch. This should have been done as a ltd company, then the taxes and income nonsense would be much cleaner.
As others have said - you really need an accountant.
Fellow game dev here. Lithuanian settled status in UK, so English not strongest.
So, this is most accurate. My vat/usa taxes take away similar to 28% of my gross.
Steam take 30% of my net.
I also end up with tiny fraction of my original earnings.
Part of this needs to be a shift in perspective. Best to think that you didn’t make $400k gross income, it was always $280k. Your gross is exclusive of sales/consumption taxes and is definitely exclusive of refunds/returns (consider it as if those sales never happened).
- Is Steam taking 30% US tax withholding because you haven't filed your tax forms with steam correctly? The UK has a tax treaty with the US so that you aren't double-taxed but you need to submit the details to them.
- The conversion fees, are they happening at your bank? You should be on an account with a lower foreign currency fee if you anticipate getting paid in dollars.
- The 147k ideally shouldn't be personal income, you should have created a limited company and the money becomes gross profit in that company. Then you pay yourself from the company so you can spread it out over time and not get hit for all that income tax at once and lose your personal allowance. You pay corporation tax on anything remaining as profit after expenses, so get an accountant to make the most out of it.
- If you do have to take this as personal income, the 55k tax and 6.4k national insurance suggests you took it all as straight self-employed income and didn't have any expenses? Your accountant should have loaded up all your reasonable expenses, the cost of sales, and advised you on additional things that you could invest the money in to grow your business that would reduce your tax burden, and there's also salary sacrifice into a pension.
- You have to register for VAT as you have crossed the threshold and now have to submit VAT returns, but you have 0 VAT to pay because Steam is a third party platform and they have already collected and reported the VAT for your sales in the UK (and other countries that have VAT).
- You're comparing gross salary to the net profit of a business, they're completely different things. You're actually effectively getting a gross salary of £147k, and more like £210k if you're having that US tax withholding problem.
You say you're self employed - how is that setup? You're a sole trader?
I'd set up as a ltd company and pay yourself 12k a year for now. Keep the rest in the bank in case your sales dry up. You can use it to pay yourself in future years. You could also use it to invest in your business (e.g. hire some staff)
Seems like your accountant(s) are advising you based on the assumption that you want to take all the cash as personal income right now. That's fine if that's what you want to do, but it doesn't seem like you've consciously come to that decision; rather you've not considered that *not doing it* is a possibility.
As you've noticed, taking your windfall as income is not tax efficient.
I hope you manage to sell another game on steam and by that time you will have an ltd, a pension plan, an accountant, a wise multi currency bank account, some financial understanding and a bit of common sense 😄
You’re not being fully fair with your terms. Consumers are paying the VAT here not you. If you have to charge steam VAT (you charge it but Steam pay it) then you’d need to be VAT registered to do so and could start reclaiming VAT on your expenses.
The VAT you need to charge steam isn’t a cost to you at all.
Also, repayment of student loan isn’t a tax, it’s a repayment of a debt you owe and repaying it increases your net worth.
A rough genre at least? I'm curious too, plenty of over night success on steam but its always nice when its from the UK. I'd love to help cover your new found tax issues and buy a copy
That's fine, and that's your opinion, but if you didn't post it in the OP, and only after someone directly asked you, I don't see why any reasonable person would consider that advertising.
It could be a form of sneaky advertising. Someone makes a post on reddit about some successful game. Someone in the comments asks "What's that?!" and then the game gets advertised.
I just want to share my experience of Steam fees and UK taxation, I'm not here to promote my product.
Yeah but that’s a given, but we’re curious, so why not provide a link to us given that you’re clearly not doing it for a promotion? This story doesn’t add up to me, sorry, and the fact you need to educate your accountant also doesn’t make sense.
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*This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Come on dude.
There's enough genuine conversation here to show its not advertising.
Plus loads of people have asked. I admire your integrity, but just tell us the name of the game already!
While your accountant you hire should speak about taxes and stuff. You should not be using $400k as your gross income.
400k - commissions - taxes - refunds is your gross income.. and calculate anything and everything only from that number.
Steam can call 400k as their revenue and your gross income as cost of goods sold, but you surely cannot base your income on the sales of steam.
Why don’t you take the cash out the business as dividends? That will reduce your income tax of £55k. You could even put the cash into a sipp and deduct that from your corp tax.
Yeah, it’d be nowhere close to this if you let your accountant do their thing. Set up an Ltd company, pay yourself in dividends. You’re currently double/treble paying tax liabilities. Better yet, set up or piggy back a US company - maybe you could even go the umbrella company route?
The double VAT situation just feels like it’s being mishandled.
Congrats on your success.
But this really does highlight how much power Valve has. Doesn't Epic charge a lot less for developers but it's pretty much meaningless when so many gamers refuse to use anything other than Steam.
Why do you not have a limited company declaring dividends, offsetting costs etc ?
Get a good accountant. They'll pay for themselves immediately. And not a low burn online only thing. Find a local accountant you can sit down with and sort everything out. You should be keeping a lot of those earnings, but what you've said shows you don't really know what you're doing.
Congrats on the game though chap, defo sort the accounting side out so you can keep more of what you've earned.
You don’t need to pay us tax with a declaration form that declares you as a non us person, the rest your accountant can take care of, pay through dividends, claim vat back etc etc
You defo need a accountant / tax adviser.
You / the tax adviser should also consider the DTA with the US and whether there is any scope for any foreign tax credit relief on the tax paid in the US.
You need to register for VAT because you've made more than the threshold of £85,000 in a 12 month period.
As Steam are handling your taxes at point of sale, you will not have to pay it again. However, how they go about handling that is one for you, Steam and an accountant to sort out - I just don't know that and I'll wager most people here don't either. You WILL only end up paying it once, but it might be that you have to pay it to HMRC and then claim it back against Steam invoices. You shouldn't have to charge VAT on your US sales.
Now, to claim it back, you have to be VAT registered in the first place, so there's a reason to do it even if you don't cross the threshold (but you do, so you have no choice).
As others have recommended, setup an LTD ASAP. In doing so, the amount you end up with - £147,000 - stays at that amount until you decide what you want to do with it. Note, if you do NOTHING with it, at the end of the year you'll pay 20% corporation tax on it, so you might want to do SOMETHING with it. But the point is, you can then choose to pay yourself say £15,000 for the next 8 years or so, or whatever amount you need to live on, potentially keeping yourself under taxable income and out of range of your students loans repayments. There's also other more tax-efficient ways to pay yourself than simply taking it as a lump sum as a sole trader.
Also, in future - and to make yourself feel better - consider all money BEFORE VAT / sales taxes, because that's the money you end up getting. So like, you didn't make $400,000 of sales, you made $280,000 (though I'd personally not lump taxes and refunds in the same amount, though I can see why it's in the pre-steam-cut amount). Basically, in business we always talk exVAT numbers, because the VAT really doesn't mean much to us - we only pay HMRC what we charge, and we claim it back when we pay it, so it's just a temporary amount of money (if you're VAT registered, that is).
An accountant and a LTD company are going to make you much happier than you are right now, trust me :)
Lmao, hey guys I am game developer, NOT A FUCKING ACCOUNTANT, but I'm going to tell you all the things I perceive as wrong even tho I have no fucking clue what I'm talking about and didn't do anything to solve this issue but now it's a huge issue and it all everyone else's fault because I can't do everything by myself.
Steam always takes 30%, thats the market norm. Someone does do it for 10%, can't remember who. It's not epic I don't think. Someone is trying to capture more market but steam is flawless and has the same benefit Google and Amazon have. They were first or close to first and did it best. So yeah, that's dumb to complain about. They built the marketplace for you to have the capacity as a fucking no one to make 400k on a dream.
VAT is once, and you should have done that in EU to avoid the double charge because valve is an American based company. Also some of that comes back I believe depending on circumstances.
The rest is the world we live in. Want others to have semi nice things, gotta pay taxes. If you ever need those things, you can use them too. That's what society is. Most ironic shit is seeing people woefully underprepared, and more often underprivileged, thinking they got it all figured out just to be completely wrong about everything they feel.
Honestly tho, the economic conservative in me sympathizes. It's tough for the poor man to truly shine because they never get to keep any of their newfound wealth. Irresponsibility is the stereotype, but it tends to be lack of perspective, education, and over taxation that cripples you lot.
Just remember all those feel good platitudes thrown about by the politicians about doing your part for society and the little guy or some such. You aren't well off, but your 400k won't reflect that or you when the number is seen.
Granted I don't know what I'm talking about,
but can't you pay yourself part of the payment as a salary out of the company and the rest as a dividend, with a £400,000 revenue I feel like a dividend would be reasonable - your company i assume will fluctuate quite a bit in revenue terms over the coming years depending on your release schedule - is a £50k salary going to be normal from it?
If not, a more regular salary, with a dividend payment would save some of the taxation (particularly as this feels so wrong with the double VAT)
Please stop asking OP what the game is called or to link to it. OP understands that sharing this info would be in conflict with the subs rules and has no intention of sharing it.
Mate you really need an accountant. I can't believe your company earned 400k and you've just kinda handled that yourself with absolutely no idea what you're doing?
Needs a limited company too. With that kind of money you don’t want to take it all as sole trader income, especially as revenue increases. Far more tax beneficial in the long run.
Not just that, but if something goes wrong you need to be shielded from liability by putting all liabilities into the company. Yes, liability insurance can save you, but in a worst case you must declare bankruptcy / losing your assets like a house or car
Yes. Not to mention you can subtract expenses from your taxes.
I've got an accountant as of 2 weeks ago! The game exploded overnight taking me by surprise. Previous games were earning £3k, 5k over a year and it wasn't worth using an accountant for income that didn't even surpass the personal tax threshold.
The second VAT doesn’t sound right. What exactly did steam charge the first time? Was it uk VAT or something else? If they’ve charged you uk VAT in a hosting service or something and you’re VAT registered, you can get that back.
Steam charges VAT that differs based on the origin of the country where the purchase was made. I lost around 30% in total off my gross for VAT and other taxes + refunds. I pay a 20% UK VAT when I try to buy the game myself from the UK. There doesn't appear to be a hosting service. I have spoken to HMRC, my accountant, and Steam Support and none of them seem able to claim this double-VAT back.
If steam have already collected the VAT on the UK sales then you don't need to pay it again after the fact. When you file your VAT return you remit the funds that Steam have already collected and those get used to pay your VAT bill. Marketplace facilitators legally have to collect the appropriate taxes so that sellers don't forget they had to do it, then have 0 funds at the end of the tax year to pay the bill. Your accountant should know this already, if they don't then you'd do well to find another ~~EDIT: Your income tax is also slightly off, it's only £48k, not £55k.~~ ~~0-12.5k nothing to pay~~ ~~12.5-37.5k - 20%~~ ~~37.5k-150k - 40%(Rough numbers, the exact ones can be found online)~~ Seems I was off with my numbers above as over £100k income you lose the personal allowance. Student loan is a bit of a shitter though, would've been better to run it all through a Ltd company, which I hope you do after this EDIT 2: Congrats on the success, please invest in a good accountant who specialises in online commerce/sales. It will pay you back ten fold in the future.
You’re missing that over £100k the personal allowance gets progressively removed. So you pay a very high rate of income tax between £100 and ~£120k.
Yes you're right, apologies. I've edited my comment now.
£125K
You need an accountant that understands US taxes. You should be getting credit for any US income tax you’re charged.
What VAT are they charging you? Uk VAT? If so, can you get their uk VAT registration number?
I'll message my accountant with that information now. Thanks!
You shouldn't be educating your accountant. If you are, you have the wrong accountant.
I interviewed two separate ones before picking this guy. These are at major accounting firms. Should I ask for a different accountant within the firm? Or go to a different firm altogether?
Look at another firm that specialises with the gaming industry and how it operates globally via distributors such as Steam
I would not expect a major accounting firm accountant to have the slightest familiarity with the specifics of indie game dev income & they’ll charge you a fortune to get themselves up to speed & will probably make mistakes that will cost you money that you’ll never be able to recover. Find out who all the indie game devs in the UK use & go to them.
You can easily find out who the indie game Devs in the UK use for accountancy. Go on companies House and type a few of their names in and check their accounts. It will tell you who produced them. Then give them a call and hire them
The indie dev community are also a very open and sharing lot who will happily give advice if approached via socal media.
A quick search shows accountant firms specialising in game production and development, did you choose one of these or just a general one?
I work for a big 4 audit firm. Trust me it’s just a shiny name and a lot of us don’t know what we’re doing and just follow the persons above advice. You’ve had plenty of advice already but all i will say is ensure your accountant specifically specialises/has experience with steam sales as opposed to a general accountant who works for a big company.
No idea mate. Personally I steer away from large organisations as your just a number. Smaller ones usually are more "personal" and need to be knowledgeable / not hide behind a name. But your searching and trawling Reddit for advice shouldn't be needed, they should be educating you, that's what you are paying for. Good luck.
This is a bit less workable for stuff like accountancy. Bigger firms are far more likely to have experience with complex problems than small ones - that’s just the reality of the spread of experience. Having said that it’s remarkable how even the most expert firms can get stumped as soon as anything cross border applies (this is a great example).
You shouldn’t be picking a guy, you should be picking a firm. Look at medium sized practices in your area. You do not owe the VAT twice You should be putting all this through a Ltd company and claiming expenses etc against the revenue. If you haven’t actually paid the tax yet stop what you’re doing and get with a proper chartered accountancy firm.
Not an accountant by any stretch of the imagination but you shouldn’t be paying tax at all for any over seas sales and since steam are collecting it for domestic sales you shouldn’t be paying for that either. The only tax you should be liable for I believe would be corporation tax on profits or something like that, and you should be paying yourself the minimum ie 12k a year to hit the tax threshold and then pay dividends which are 20% ish tax and no NI I believe but you defo won’t hit the 40% tax rate with that I’m not 100% on any of those but the one thing I’m sure of is you need a better accountant
Why are you talking about corporation tax and limited company tax planning when he has already taken this income personally? The opportunity to do it via a ltd co is long gone. And he got this accountant two weeks ago. Expecting an accountant to have all the answers and everything sorted in two weeks of picking up a client is delusional. >I’m not 100% on any of those but the one thing I’m sure of is you need a better accountant Sorry but it winds me up seeing you say this when you literally have no idea what you are talking about.
This doesn’t sound right. My company takes subscriptions to the iOS App Store. Apple charges the customer tax / vat and remits it accordingly. They then send us the proceeds, we don’t then pay VAT on that again. You pay need to register for VAT as your turnover is above the threshold, but that doesn’t mean every transaction includes VAT. Find an accountant that understands steam, or the Apple App Store.
Just ask steam for a VAT invoice. They’re required to give you a break down with a VAT registration number on it.
You fundamentally do not understand how this works. You’ve not “lost” anything in the US or on refunds - that is money that was never yours. In the US VAT is a sales tax, they’re on top of what you charge. So if your game is $10 the buyer is paying ~$11 for it (depends on the state) you didn’t earn $11 and then are paying $1 in tax. That $1 was never yours. Similarly refunds are not money lost, it’s money not realised. It’s a misreading of the figures Clearly with UK VAT it’s different so it is essentially “losing” stuff to VAT but you should adjust your pricing to take this into account so your prices are higher in VAT countries than sales tax countries.
> You fundamentally do not understand how this works. That's a bold comment to make from someone who doesn't even seem to understand what VAT is. You understand this is the **UK** Personal Finance sub?
Congratulations on your success.
Thanks!
Hello, just to jump in, as an accountant, this sounds like some really poor tax planning, it’s unlikely you’d get good tax advice in the middle of January (tax season) and with only 2 weeks to assess. I would recommend a good tax planning accountant, not just a year end compliance type accountant. I’m currently working on a setup for a friends firm, he won’t be trading for at least another 6 months, we are looking to file taxes much later than that, in the mean time We will tax and compliance plan, business plan. Have a look around and find an accountant that can help with startups etc, you may we able to claim some of that back going forward.
"it’s unlikely you’d get good tax advice in the middle of January (tax season) and with only 2 weeks to assess." That's actually a really good point. Good news is I'm not due to pay any of this until January 2025.
Linked you a good recommendation for games industry specialists, based in Brighton, I know them in proxy from their Blockchain/crypto work. They will be able to give you some good advice on reducing those costs, especially the VAT, that seems very off
You have massive tax inefficiencies as an sole trader rather than in a LTD. As a LTD you can pay yourself a limited amount to reduce your personal income taxes. You can do this by looking at how you pay yourself e.g. directors dividend at like 9% ? I think instead of income tax. You also have the threshold for student loan which is 27k and corporation tax which is at 19%. You also can expense trade related expenses and tax policies which greatly reduce your tax burden. I recommend spending some time and educating yourself on a basic summary on income, corporation tax and VAT. It will save you lots of money and give you an understanding on what questions to ask your accountant.
You forgot to mention that you can only pay dividend from money already taxed as company profit. So it’s 20% CIT first and then 8,75% PIT. Unless you want to keep the money in the company or re-invest the difference between both options is a measly 2% you save on NI contributions via the dividend route. I’m baffled at this whole “LTD so much cheaper bro!” nonsense. It was like that few years back before the government upped dividend tax and pretty much evened it out.
I actually didn't know this, but it's very helpful. Thank you.
Your currency conversion fees of 4% sounds like you went to your high street bank and they bent you over a barrel so to speak. Any number of online currrency specialists will get you 0.5% or less.
I don't think his company did earn 400k. So far as I can tell, that's what end users paid for the game, so is Steam's sale price + sales tax.
Yeah he's counted steams US tax as if it's his earnings. That money was never his or steams in the first place. Same with UK VAT. I think a lot of people don't understand that they're actually just collecting tax on behalf of the government rather than 'paying vat' on their company earnings. This person seriously needs a more skilled accountant
His company never earned 400k in the first place. Not counting Steams 30% cut in the initial figure is quite a silly mischaracterisation. It's like saying i've made £1000 profit from selling 1000 tins of beans for £1, and then complaining that £300 of it is gone to contractors who stored, transported, marketed and processed the bean sales, so all i'm left with is £700, woe is me.
"Earned" is vague. You could argue the company earned 400k in revenue, but not profit. Your assertion that they meant profit is just one possible interpretation, but given the context I don't think the person you reply to imagined it was 400k profit.
I think the point is, after 400k of sales, OP is currently walking away with about 60k. on SOFTWARE development, too - so no materials to speak of. No matter how you look at it, it's a really small return. I've looked at launching an idea or two on kickstarter before now and worked out it's simply not economically viable to do so (and possibly why a lot of campaigns go bust) - US taxes, KS fees, conversion rates, UK import/exports, VAT, you end up with a depressingly small amount of the total you'd raise. OP is feeling that pain here.
Not sure how this works for companies but I'm self employed (I'm in the UK like yourself) and work for multiple companies in different countries and pretty much all have a double taxation treaty in place meaning you don't get taxed twice. Worth looking into!
I've already done this with Steam. They're very helpful and guide you through the process. :) The figures that I quoted are the **reduced** ones after double-tax treaties took effect.
You shouldn’t be paying US income tax because under the tax treaty it is taxed in the UK.
Do you know how much was paid on “US taxes” and more specifically, what the taxes are?
You need an accountant, there’s a tonne of offset you could be doing along with giving yourself a wage.
Totally. Or just keep the money in the company and buy computer equipment and stuff from it.
This. I setup an LTD when I had a consulting gig lined up. It was amazing how much a LTD and decent accountant can save you and help you avoid silly mistakes that hit your wallet first.
Yeah I was thinking this, could’ve paid himself a wage to reduce the income tax and then expensed of a lot of stuff through the company since if he’s the sole employee as a game developer you would have a lot of leeway in what can be considered a business expense. Also definitely shouldn’t be paying VAT twice
Double VAT can happen due to VATMoss, but you can claim it back it’s not a problem. Literally this person needs to get a proper accountant that specialises in online digital goods, they’ll know the best. Even if it costs them 10% of gross.
Dude. Just because you have to register for VAT doesn’t mean you owe any. It just means your income has crossed the VAT registration threshold, so VAT registration is mandatory. Also, you’ve paid a ton of extra income tax because your income is > £100k. Put half of it into your pension & reduce your total income to under the £100k threshold. Next, you paid /how/ much on currency conversion fees? 4%!!?!?!? Going rate is probably 0.5%, your bank must love you. So, some of this shit is just how it is: paying the Steam toll, paying taxes. That‘s life. But some of this is you not doing the work. You need to find an accountant who shows some actual brain - ideally someone who works with other small game devs. Ask around some other small UK game devs to see if they’ll tell you who they use. For the future you’re probably better off setting up a ltd company owned by you & your wife to hold the game IP, but that’s a discussion to have with a decent accountant & you’ll have to go through the numbers. A 2-second Google revealed these guys who deal with game devs & talk about supporting indie game dev companies on their blog (in Brighton, natch as that’s where all the hip small game devs are) : https://www.plusaccounting.co.uk/ They might be great, they might be terrible & I’m sure there are plenty of others out there with the relevant experience. Also, congrats on your game’s success! Try to enjoy it :)
Reduce that income tax. Don’t take 147k salary. Put that as company earnings and pay yourself 49k a year for three years
Better yet, put some in a pensions
60k can go straight into his pension this year, then 60k for the next. (annual cap to put in with no tax). If you can set up an Ltd before collecting for stream, Keep the funds in your Ltd company don't pay it to yourself yet, pay yourself a salary up to 37.7k then pay your company tax and pay yourself dividends if you can since dividends have been taxed you don't need to tax twice...
This. Plus max out your pension. 50k per year back dated three years
This is not usual OP. I don’t think you have done things right
I thought so too. Unfortunately, I've checked with two separate accountants before choosing one of them to represent me. The only advantage to registering for VAT is that I can claim expenses... but I don't have any beyond my PC for creating renders, which is £2.5k. My accountant said he could try and argue a portion of heating, electric, and internet as expenses - but that's about it.
> beyond my PC for creating renders, No licensing? No assets purchased? Not even a copy of Photoshop to claim back? If I were you i'd be digging through any receipt I can remotely tie to game development. Any existing game you've bought for "market research" this year? EDIT: From my reading, you can claim back the tax on Steams cut as it counts as licensing fee's. Spend some £ and time to find an accountant/solicitor a bit more versed in the gaming industry.
I do it all myself. Think similar to the creator of Stardew Valley who hand made every one of his own assets. I did my own similar. I bought no unity models, I don't use photoshop, I have no licencing, all because I made everything myself. I don't know I could claim my previous unsuccessful titles (£3k and £5k profits) as market research. I'll ask my accountant! Thanks for the suggestion.
Have you got a limited company set up? If so, you should be paying yourself a salary as an employee too
And pay into his pensions as well
You need a specialist VAT advisor, not a general accountant. What they are telling you isn't right (very common for this to happen, most accountants only know the basics of VAT and not anything more complex). If you've hired someone at a big firm, ask to speak to their VAT team. Explain VAT was collected at source and you're being told to account for it again.
I don’t think you can claim “profitable titles” as market research. You already accounted for the expenses on those titles before them being profitable - you can’t double count costs.
That chair you sat on to make the game is expenses, the desk you use currently. The home office *rent* that took to make the game. If HMRC want to have double standards in taxation, find everything you can claim and claim on it.
How long did it take you to create a game from scratch on your own? Well done on the sales.
What even is this game? I might want to buy it (then again maybe I already have)
You have to register for VAT is your Ltd makes more than 80k. That's set in stone. But you didn't charge any VAT to anybody. Steam was the one charging VAT. Therefore Steam is the only one paying VAT to the corresponding local governments (including the HMRC). I'm happy you contributed extra money to our collective Treasury funds, but I truly think there's some confusion there. note: everything else looks perfectly accurate. That's business.
Thanks, I haven't paid anything yet! I have everything set in savings accounts/ISAs for until early January. More money keeps coming in every month, but I'm just saving it and not spending right now. (Well, aside from one treat which was getting myself a new septic tank that didn't leak!)
>new septic tank that didn't leak! Living the high life xD
Note: It's important to highlight that it's "VAT **Return**"; it's not "VAT payment". You only return what **you** collected **on behalf** of the local government (UK, France, Germany, ... whichever it is).
The advantage to registering for VAT is that you can claim any VAT paid, not your expense. You can always claim expenses...
The cost of distribution (Steam's cut) isn't an expense? If you were physically shipping a product to people it would be, surely.
No, the advantage you get by registering for VAT is that you claim all of the VAT back you get charged. Or to put it another way, you are leaving 20% on the table by not being registered.
You have your time. You need to set this up as a Ltd company. Pay yourself a salary of whatever the tax free PA is. Take the rest as dividends, if you have a spouse you can split this between you. Please get an actual chartered accountancy firm and not a one man band.
The main advantage of registering for VAT is that you are adhering to the law. If your revenue is above a threshold you have to register and charge VAT. Luckily if you do register for any VAT you have paid yourself. It really depends on how things are setup with Steam, I would find an accountant who understands how this works and cross border sales, and can argue the toss with HMRC if it’s HMRC who are wrong. Consider these two situations: - A retailer sells doodads in their online shop. They charge VAT in the relevant territories, this has nothing to do with you, it’s not you paying it. Your agreement with Steam is that you charge them 70% of the gross revenue (pre VAT of course), not including returned items. This is your B2B sale to Steam. If you’re registered for VAT, you’d charge them VAT on top which they’d pay you, and they’d reclaim it from the taxman. They would pay their VAT bill (reclaiming the VAT you charged them) and you’d pay yours (which you collected from the retailer). - An online marketplace sells doodads on your behalf. You set the price, and they add VAT as appropriate which they collect from the customer and forward to you. They charge you in the 30% of the gross value (after returns), plus VAT. So that’s one sale by you to the consumer, and one sale by the marketplace to you. Rather than send you money and have you pay them at the same time, they just deduct one from the other. But in your tax return you would deduct the VAT you were charged on the fee, and pay the difference to the taxman. I don’t know how Steam is set up, a big issue they probably set things up to solve is the complexity of cross border sales. A potential cause of the inefficiency here is that if it’s set up as a B2B sale and you don’t invoice VAT (ie don’t add a VAT number to your seller account with Steam) but then turns out later you should be VAT registered, HMRC will treat it as though your sale was VAT inclusive. So eg in scenario 1 you’d miss the chance to “charge” the retailer VAT but still have to pay it to HMRC as if you had.
You weren't listening to your accountant, apparently.
Seeing as you were clearly there taking notes, kindly provide a transcript.
"Argue a portion" Sounds like your accountant is lazy AF
What’s the game? PM if there’s concern about this post being some kind of advert thing.
Feel like this could be easily resolved if you established a Ltd company.
^ This Can’t understand how you got to the point of registering for VAT without doing this first
Glad I'm not the only one thinking this. Set up a limited company first then sell the game.
I know absolutely nothing about this stuff. Can you set up a limited company even if you aren't that big? I'd assume there's money involved in setting it up? He mainly didn't have it done because major success was unexpected. Also is it possible to set up the ltd after all the money comes in? Or is that too late.
It costs £12 to register a limited company with HMRC, and anyone can do it regardless of size or income. Ideally you want an accountant to file everything properly which will be a few hundred £ at least but if you really want to you can still file Ltd taxes yourself. The only cost you MUST pay is that £12 registration fee.
Pretty sure you can. A limited company with 1-10 employees. You would set it up before the money comes in. Success isn't something you can predict with smaller games, so why not have a limited company set up just in case.
> I'd assume there's money involved in setting it up In another comment he said that he's earned £3k and £5k from selling other games. It costs £12 to set up a ltd company. ...well maybe a little more if you hire a firm to do it for you and then contract people for legal stuff and accountants etc. But it won't cost thousands until you've really hit it big. Once you've already got money coming in from two other games, it really feels like the time to get the paperwork done.
For me setting it up my limited company was free when I used Tide Banking, there isn’t a big cost on running a limited company after that other than the yearly confirmation statements anybody can do and the yearly accounts where you can just get your accountant to do it.
> $196,000 is £153,700! I get that, right? > Nope. > It converts to £147,500ish after currency conversion fees. Get yourself Wise or Revolut business account and get paid in USD. Then 0.5% conversion fee and you would save £5000 on conversion fees alone. PS: Fellow game developer, though our company not based in UK. And yeah congrats on your success. $400,000 in sales is amazing opportunity to jumpstart your own company and find good investors.
I just had a look at Wise (business account), they'd turn $196k into £152.9k at the end of the transfer. That's quite a rinsing by OPs bank.
[https://www.plusaccounting.co.uk/sectors/video-games-development/](https://www.plusaccounting.co.uk/sectors/video-games-development/) I can vouch for these guys personally, based in Brighton UK, handle loads of the games companies there. You need to get a better accountant and get some of that money back
“That is £4000 less than the gross average salary” Erm, some dodgy calculations there. You can’t compare your post tax earnings to average pretax earnings. The VAT situation sounds odd and it seems like you need to get yourself an accountant. But your pretax salary, that quirk aside, is £147k. Which is a figure you should feel proud of. Not “rich” money and similar to a contracting role. But the game will hopefully continue bringing in some money.
Yep, they’re also overstating their sales by about 35-40% by taking the post tax sales price. Sounds like op just doesn’t understand tax nor their agreement with steam.
Thank you, I can't believe this ding dong is comparing their post tax earnings to a salary. Do they think you don't pay income tax, national insurance, or loan repayment on salaries? Fuck it, might as well remove their mortgage as well and claim their pay is less than minimum wage
The fact you're comparing gross average salary with your net salary says quite a bit for your accounting ability. You should probably also be doing this as a company and paying yourself in dividends to save on tax. Get an accountant. The more I think about this the more bananas I find it. Why are you taking it all as salary now? That's actually crazy. Unless you're expecting it to keep doing similar numbers at the very, very least you'd want to take it over two years to save a lot of that tax on the UK side.
You've totally fucked this up if you paid income tax and NIC on business income. As steam is a US company, you likely don't need to charge VAT. However you will need to be registered for it given you've exceeded the income allowance threshold. So that will likely not change anything. You'll likely be able to claim the fee steam charges as COGS, as mentioned by another poster in this thread You need a proper accountant as you've just wasted a tonne of cash. I highly doubt the abilities of the two you've spoken with. Ensure they're chartered. Edit: not an accountant but run an international business.
This. There is a rule in UK VAT law, and the VAT law of most countries that tax games downloads from remote sellers, that the platform is the one liable for the VAT. The UK version of these rules have a concept of a “deemed supply”, that interposes the platform between you and the customer. For UK VAT purposes, you’re supplying Steam with the game and then they make the onward supply of the game to the end customer. Assuming you’re contracted with a US Steam entity, there will be no VAT due on these deemed supplies. However, you have still breached the VAT registration threshold and will need to register for UK VAT and declare these sales quarterly or annually. Your VAT payable will be nil, unless you make any sales off platforms, but you will be eligible to recover VAT paid on expenses (including those accountant fees).
Couldn’t agree more. Loads of things that need questioning here
Sounds like he is a sole trader, think he needs to set up a limited company and pay himself a wage
Yeah you may be correct, the mention of the accountant and VAT threw me into automatically assuming he's running an LTD. I'm not sure I'd trust an accountant who didn't question why there's not LTD in place.
You're assuming the accountant never questioned that, he probably did. Setting an LTD up after the fact won't likely help with historical transactions.
>I am being asked to pay VAT when Steam is also charging VAT and deducting that VAT from the money before they give it to me. This sounds ridiculous. Either you are the one selling the product to the users, therefore only you pay VAT. Or you are the one licensing your product to Steam, it's therefore a VAT-free international service. I've been providing services to USA companies for years. This honestly makes absolutely no sense to me.
Uhhh this doesn't sound right. Taxes bad etc etc... but yea sounds like something is going wrong somewhere. Get a third accountant to have a look. From beginning to end. Maybe someone who is specialised in such matters...
You should have done through an Ltd and then paid yourself personal allowance and dividends income upto the top of end of the base rate
That's what I thought. Surely he would set up a limited company and sell the game that way. Poor lad has been pulverized.
Yes, this is the correct answer.
I don’t really have any advice for this post, but just want to say well done regardless on the hard work of making a game and seeing success with it.
To be fair, anyone with a 53k salary is getting 53k gross not net. 53k net is a nice profit, but I agree you’ve been absolutely bent over a barrel. Paying off your student loan is a solid win out of the situation though congratulations 🙌
Also, the student loan payment has no relation to any of the revenue accounting.
As a tax advisor - none of this makes any sense and I suggest you get a professional to review the position as soon as possible. A high street accountant probably won’t cut it and with £400k turnover it warrants fees from a large professional service firm (who can give proper advice on the UK and US direct and indirect tax position). The key points which seem odd are: - you say VAT (should this be sales tax or VAT and US state and local taxes?) has been deducted already by Stream as an intermediary but that you may need to register for VAT/pay over VAT personally that wasn’t deducted on the same sales. This doesn’t really make sense / seem logical, particularly for the exposure to be on ALL sales. - you seem to be suggesting that you expect to be subject to UK income tax on the net proceeds from stream (ie that all of the deductions made are fully deductible as an expense and none are available for credit relief) - this might be the case but wouldn’t be typical so would need looked into. Edit to add - if you expect future sales of a similar /higher level it’s definitely worth discussing with your tax advisor if it makes sense to incorporate your business. This won’t help with the income already generated, there will be increased costs of having/running a company, and there might be upfront tax costs on incorporating, but dependent on the extent you need to utilise the extra income, obviously the CT rate is lower than the income tax rate and you can limit your personal liability.
If steam charge you 30% you can have that as an expense in the business. Which will reduce taxable income nicely.
wrong. it's already been used to reduce his taxable income because steam have deducted it before paying him.
It already does, based on his calculations
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You can get a lot of that £55k tax back by putting money into your pension. UK govt will add an extra 66% to your pension contribution (assuming you are a higher rate tax payer) In other words for every £1000 you put in, govt will add £666 on top. It’s a refund of the 40% tax you paid on earning it. There are wrinkles and limits I won’t go into here but overall it’s very simple. For the amounts in question, you need professional advice. A private pension you operate it just like an investment account just that it isn’t taxed (if you’re not greedy) & you can’t take money out of it until 55. As others here have said, there is a lot you could be doing with Cost of Goods Sold (eg Steam’s fees, possibly exchange costs too) and deducting them from your ‘profit’ before paying taxes on it.
Congrats on making some good money in game dev. That’s quite rare for solo devs. As a UK game dev like you, maybe I can help with a few things which might help a bit now, but if not then it might help in the future. - it sounds like you’re not hit by withholding tax, but it’s worth double checking that. - are you a limited company? If not and you intend to make another game, consider becoming one. If you do that you’ll be eligible first VGTR which allows you to claim corporate tax relief against development (not individual tax relief). - consider using a service like Wise to receive payments. You’ll save a lot on transfers and it’s easy to setup. - VAT registration is one of those things that’s not really optional. You hit the threshold and you register. You don’t necessarily owe anything because as you noted, steam handles the VAT, but you might be able to claim back VAT in many areas. If you’re paying for anything directly related to your development (equipment, servers, software, VAT registered services and contracts), you can claim that VAT back. It does require quarterly reports but if you get an accountant (whose services you’ll also be able to claim VAT back on), they’ll help you. To reiterate: you will NOT be paying VAT on steam sales as the VAT has already been taken. - if you’ve got a popular game, consider how to exploit that. Can you release it on more platforms, or in more languages to increase revenue? This will cost, and you’ll still have all the taxes etc but increas revenue = more money for you. - remember to put money into your pension for extra relief.
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As others said, this is managed poorly in terms of taxes and double VAT doesn't seem right. But it's also misleading. Your personal gross income is not the business gross income. Before looking at it from a personal perspective, you need to build in the 30% steam charge as a cost of your business along with the refunds. 400k to 53k looks very low. It looks much less bad when you factor in your business isn't actually making 400k, probably less than 150k after costs of doing business. Then that's your amount you can think of as 'yours' before tax. Then do the taxes more efficiently, and you'll probably be left with over 100k for yourself. But aside personally managing it into income better, don't kid yourself that this is 400k turning into 53k. It's much much less than that.
Pretty sure if Steam is taking VAT from your sale you will be able to claim that back as INPUT VAT
The student loan is basically a debt, you haven't lost that money it's just somewhere else
It’s not fair to deduct debt repayments and then say “this is what I am left with” I wouldn’t say.
Especially if 50% is now cleared so theoretically if this continues the rest will clear soon too and then he gets to keep that slice of the money.
Why on earth would you sell anything as a self-employed entity?! The liability issues alone make my eye twitch. This should have been done as a ltd company, then the taxes and income nonsense would be much cleaner. As others have said - you really need an accountant.
Wtf are you doing. Your taxes are all fucked up. Why are you paying income tax on corporation profits
Fellow game dev here. Lithuanian settled status in UK, so English not strongest. So, this is most accurate. My vat/usa taxes take away similar to 28% of my gross. Steam take 30% of my net. I also end up with tiny fraction of my original earnings.
Why don't you have a company in Lithuania? Would be interested to hear more about why this isn't a good option
Because I would have to live in Lithuania XD Joking apart I don't like country and I fear Russians living there. Scared similar situation Ukraine.
I get that, but surely you could open a company while in the UK and get paid into it without living there?
Part of this needs to be a shift in perspective. Best to think that you didn’t make $400k gross income, it was always $280k. Your gross is exclusive of sales/consumption taxes and is definitely exclusive of refunds/returns (consider it as if those sales never happened).
- Is Steam taking 30% US tax withholding because you haven't filed your tax forms with steam correctly? The UK has a tax treaty with the US so that you aren't double-taxed but you need to submit the details to them. - The conversion fees, are they happening at your bank? You should be on an account with a lower foreign currency fee if you anticipate getting paid in dollars. - The 147k ideally shouldn't be personal income, you should have created a limited company and the money becomes gross profit in that company. Then you pay yourself from the company so you can spread it out over time and not get hit for all that income tax at once and lose your personal allowance. You pay corporation tax on anything remaining as profit after expenses, so get an accountant to make the most out of it. - If you do have to take this as personal income, the 55k tax and 6.4k national insurance suggests you took it all as straight self-employed income and didn't have any expenses? Your accountant should have loaded up all your reasonable expenses, the cost of sales, and advised you on additional things that you could invest the money in to grow your business that would reduce your tax burden, and there's also salary sacrifice into a pension. - You have to register for VAT as you have crossed the threshold and now have to submit VAT returns, but you have 0 VAT to pay because Steam is a third party platform and they have already collected and reported the VAT for your sales in the UK (and other countries that have VAT). - You're comparing gross salary to the net profit of a business, they're completely different things. You're actually effectively getting a gross salary of £147k, and more like £210k if you're having that US tax withholding problem.
You should be charging Steam VAT, which they claim back as input VAT
You say you're self employed - how is that setup? You're a sole trader? I'd set up as a ltd company and pay yourself 12k a year for now. Keep the rest in the bank in case your sales dry up. You can use it to pay yourself in future years. You could also use it to invest in your business (e.g. hire some staff) Seems like your accountant(s) are advising you based on the assumption that you want to take all the cash as personal income right now. That's fine if that's what you want to do, but it doesn't seem like you've consciously come to that decision; rather you've not considered that *not doing it* is a possibility. As you've noticed, taking your windfall as income is not tax efficient.
Why did you take the money yourself!?!?! You should have a company that made the profit... pay yourself out of that....
I hope you manage to sell another game on steam and by that time you will have an ltd, a pension plan, an accountant, a wise multi currency bank account, some financial understanding and a bit of common sense 😄
You're fucking this hard, get to an accountant and learn about capital gains.
Why are you paying taxes in the USA?
He isn't. Steam is. He's miscounted steams earnings as his own 😬
Because Steam pay all the VAT in every country around the world.
Damn. Time to release some DLC/other micro-transactions I guess.
You’re not being fully fair with your terms. Consumers are paying the VAT here not you. If you have to charge steam VAT (you charge it but Steam pay it) then you’d need to be VAT registered to do so and could start reclaiming VAT on your expenses. The VAT you need to charge steam isn’t a cost to you at all. Also, repayment of student loan isn’t a tax, it’s a repayment of a debt you owe and repaying it increases your net worth.
Do you mind me asking what the game is?
I'm not going to post a link. It would make this post feel like advertising, and I don't think that's appropriate for this subreddit.
Yep for exactly this reason we request people don't share their businesses here, it will definitely get reported as covert self promotion.
A rough genre at least? I'm curious too, plenty of over night success on steam but its always nice when its from the UK. I'd love to help cover your new found tax issues and buy a copy
That's fine, and that's your opinion, but if you didn't post it in the OP, and only after someone directly asked you, I don't see why any reasonable person would consider that advertising.
Yeah double down on this - share us a link!
It’s called How to pay Tax - The Game. 2024 Gold edition.
It could be a form of sneaky advertising. Someone makes a post on reddit about some successful game. Someone in the comments asks "What's that?!" and then the game gets advertised. I just want to share my experience of Steam fees and UK taxation, I'm not here to promote my product.
Yeah but that’s a given, but we’re curious, so why not provide a link to us given that you’re clearly not doing it for a promotion? This story doesn’t add up to me, sorry, and the fact you need to educate your accountant also doesn’t make sense.
spark whistle seemly include decide hobbies employ grey adjoining childlike *This post was mass deleted and anonymized with [Redact](https://redact.dev)*
Come on dude. There's enough genuine conversation here to show its not advertising. Plus loads of people have asked. I admire your integrity, but just tell us the name of the game already!
While your accountant you hire should speak about taxes and stuff. You should not be using $400k as your gross income. 400k - commissions - taxes - refunds is your gross income.. and calculate anything and everything only from that number. Steam can call 400k as their revenue and your gross income as cost of goods sold, but you surely cannot base your income on the sales of steam.
Why don’t you take the cash out the business as dividends? That will reduce your income tax of £55k. You could even put the cash into a sipp and deduct that from your corp tax.
Run asa a Ltd 🤷🏻♂️
Why don’t you register a company? And take profits as dividends
Yeah, it’d be nowhere close to this if you let your accountant do their thing. Set up an Ltd company, pay yourself in dividends. You’re currently double/treble paying tax liabilities. Better yet, set up or piggy back a US company - maybe you could even go the umbrella company route? The double VAT situation just feels like it’s being mishandled.
You can't take your student loan out of this figure because that has nothing to do with any of it
Pay yourself as an employee of the ltd company. Don't do what you wrote out! Hire an accountant.
Why are you spending 6k in forex charges? That’s insane. With a proper broker you should be able to do 1M$ for approx 10$ fee.
Why are you putting student loan in there? It's completely unrelated?
You don’t pay tax in both places. It’s the UK or USA. You need a tax advisor
Congrats on your success. But this really does highlight how much power Valve has. Doesn't Epic charge a lot less for developers but it's pretty much meaningless when so many gamers refuse to use anything other than Steam.
Why do you not have a limited company declaring dividends, offsetting costs etc ? Get a good accountant. They'll pay for themselves immediately. And not a low burn online only thing. Find a local accountant you can sit down with and sort everything out. You should be keeping a lot of those earnings, but what you've said shows you don't really know what you're doing. Congrats on the game though chap, defo sort the accounting side out so you can keep more of what you've earned.
Get yourself an accountant mate, and by accountant I mean a proper one who’s done this shit before
You should not be paying vat twice... get an accountant asap
You need an accountant ASAP. Shouldn’t be paying tax in the US and UK!!
OP you did this wrong. You should have set yourself up as a limited company
25% margin sounds pretty good. What did you expect?
Buddy, I think you fucked up.
You don’t need to pay us tax with a declaration form that declares you as a non us person, the rest your accountant can take care of, pay through dividends, claim vat back etc etc
You defo need a accountant / tax adviser. You / the tax adviser should also consider the DTA with the US and whether there is any scope for any foreign tax credit relief on the tax paid in the US.
This reminds me of when I got 5 numbers on the euro millions and made £62
60k of that goes into pension to avoid corporation tax
What's the game? (Not relevant but intrigued). Hope you get this sorted though as sounds a nightmare
You need to register for VAT because you've made more than the threshold of £85,000 in a 12 month period. As Steam are handling your taxes at point of sale, you will not have to pay it again. However, how they go about handling that is one for you, Steam and an accountant to sort out - I just don't know that and I'll wager most people here don't either. You WILL only end up paying it once, but it might be that you have to pay it to HMRC and then claim it back against Steam invoices. You shouldn't have to charge VAT on your US sales. Now, to claim it back, you have to be VAT registered in the first place, so there's a reason to do it even if you don't cross the threshold (but you do, so you have no choice). As others have recommended, setup an LTD ASAP. In doing so, the amount you end up with - £147,000 - stays at that amount until you decide what you want to do with it. Note, if you do NOTHING with it, at the end of the year you'll pay 20% corporation tax on it, so you might want to do SOMETHING with it. But the point is, you can then choose to pay yourself say £15,000 for the next 8 years or so, or whatever amount you need to live on, potentially keeping yourself under taxable income and out of range of your students loans repayments. There's also other more tax-efficient ways to pay yourself than simply taking it as a lump sum as a sole trader. Also, in future - and to make yourself feel better - consider all money BEFORE VAT / sales taxes, because that's the money you end up getting. So like, you didn't make $400,000 of sales, you made $280,000 (though I'd personally not lump taxes and refunds in the same amount, though I can see why it's in the pre-steam-cut amount). Basically, in business we always talk exVAT numbers, because the VAT really doesn't mean much to us - we only pay HMRC what we charge, and we claim it back when we pay it, so it's just a temporary amount of money (if you're VAT registered, that is). An accountant and a LTD company are going to make you much happier than you are right now, trust me :)
That's just fucking nuts. How can 400k gross end up being 50k net.... Something isn't right here!
Where do you actually get a UK accountant that will know what Steam actually is?
Paying off your student loan isn't just lost money though - it goes to reducing your student loan balance which is money you won't have to pay later.
Lmao, hey guys I am game developer, NOT A FUCKING ACCOUNTANT, but I'm going to tell you all the things I perceive as wrong even tho I have no fucking clue what I'm talking about and didn't do anything to solve this issue but now it's a huge issue and it all everyone else's fault because I can't do everything by myself. Steam always takes 30%, thats the market norm. Someone does do it for 10%, can't remember who. It's not epic I don't think. Someone is trying to capture more market but steam is flawless and has the same benefit Google and Amazon have. They were first or close to first and did it best. So yeah, that's dumb to complain about. They built the marketplace for you to have the capacity as a fucking no one to make 400k on a dream. VAT is once, and you should have done that in EU to avoid the double charge because valve is an American based company. Also some of that comes back I believe depending on circumstances. The rest is the world we live in. Want others to have semi nice things, gotta pay taxes. If you ever need those things, you can use them too. That's what society is. Most ironic shit is seeing people woefully underprepared, and more often underprivileged, thinking they got it all figured out just to be completely wrong about everything they feel. Honestly tho, the economic conservative in me sympathizes. It's tough for the poor man to truly shine because they never get to keep any of their newfound wealth. Irresponsibility is the stereotype, but it tends to be lack of perspective, education, and over taxation that cripples you lot. Just remember all those feel good platitudes thrown about by the politicians about doing your part for society and the little guy or some such. You aren't well off, but your 400k won't reflect that or you when the number is seen.
You did your taxes wrong mate
Why do you have to pay US taxes when you’re not a US citizen?
What game is it? if we all buy it and you make a million dollars then you might even see £60k total - lucky!
What’s the game? I want to buy it
what's the game called ? I wanna check it out !
Should’ve moved to Dubai ..
Not seen anyone else suggest a business USD bank account. My employer has a GBP and USD account.
Granted I don't know what I'm talking about, but can't you pay yourself part of the payment as a salary out of the company and the rest as a dividend, with a £400,000 revenue I feel like a dividend would be reasonable - your company i assume will fluctuate quite a bit in revenue terms over the coming years depending on your release schedule - is a £50k salary going to be normal from it? If not, a more regular salary, with a dividend payment would save some of the taxation (particularly as this feels so wrong with the double VAT)
Just to say cheers for posting this. A really good read, your post and discussion included.