I am not sure what exactly you are asking but if you pass a certain point of professionalism (have employees, freelancers working for you, a office,d eal a lot with models, ...) it definitely makes sense in terms of limiting liability, organization and tax concerns....but you should formulate your question a bit more specific.

Thanks yes I would be a sole trader so is it as simple as claiming "reasonable" expenses (and keeping records of course).

VAT threshold is �75k

You need to hang on to your expenses receipts for six years btw

Yes, you should register as a sole trader - even if you end up not having to pay any tax once earnings minus legitimate expenses is calculated. Best be on the safe side - from personal experience I know Her Majesty's Customs are ruthless and unforgiving.

Does anyone fromUK especially have any thoughts about at what point its worth treating Mstock as a serious business for Tax purposes etc rather than just declaring the extra income?

The main and primary reason you should (besides having to tell HMRC of any extra earnings by law) is:

You can claim all expenditure on photographic expenditure including cameras lenses printers and lighting equipment against your tax burden.

If you have the receipts you can claim a capital allowance on equipment spend up to 5 years in the past.

I did and got a �1250 rebate from HMRC.

You can claim any other expenses such as business travel (�0.45 per mile up to 10,000 miles �0.25 after that) printer paper memory cards accountant fees props and so on.

You can claim for books and magazines and if you advertise website fees advertising costs etc.

You can claim a reasonable amount for using part of your home for work i.e. spare room as an office garage as a studio space etc.

Of course you must run it as a business and keep copies of receipts invoices and bills.  A simple concertina folder to store each month's invoices and receipts and a spreadsheet to keep track of incoming's and outgoings.

If you do work other than stock on a business to business basis it is worth registering for the "flat rate VAT scheme" as you can charge VAT on sales invoices but then retain a portion of the VAT to offset against purchases http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm#5

So for example every �20 of VAT sales HMRC gets �11 of the VAT and you keep �9 

And no you don't need to go over the VAT threshold of �75000 per year to register.

It's a lot simpler than the regular VAT process

http://www.hmrc.gov.uk/vat/start/schemes/flat-rate.htm

I am registered on the flat rate scheme because I do business to business sales as well as stock and keep a good chunk of the VAT charged.

Alamy will add VAT to self billing invoices if you are registered and you can retain a portion of the VAT from those sales too.

It's also simple to operate you just record your sales and declare the VAT once a quarter and pay HMRC by direct debit.

I even saved myself �100+ per year by doing my own accounts but you might want to employ an accountant for your once per year tax returns.

And VAT is not applicable to overseas earnings outside the EU so Shutterstock, iStock and all those other none EU agency earnings are outside the scope of VAT rules.

However they are still classed as earnings and need to be declared for normal income tax.

Thanks for your very helpful reply Teddy :-). Due to personal circumstances I was below the tax threshold but did a self assessment. Combined with some other interests and with the ability to undertake more photographic work I intend to increase income - interesting times!! Not sure about an accountant I'm pretty good at that sort of stuff.

If you were below the tax threshold I'm guessing income tax?

Have you thought of working tax credits? They can be very useful