There's a couple of considerations here.
Firstly, would this activity count as "trading".
If you're trading you are legally required to register as self-employed .
The line between a hobby activity and trading can be blurred but a key feature is whether you're aiming to make a profit (whether you manage it or not!).
Secondly are you actually making any money?
Even if what you're doing counts as self-employment, self-employed people pay tax on the profits
they make from their activities, not on the total amount of money they take in.
If you spend all the money you take in on keeping the server running
then you're not making any profit
so there's nothing to pay tax on.
money.stackexchange.com/users/13720/Nigel Harper
This page lays down the requirements for an "unincorporated association" to pay tax (i.e. any group that's not a registered entity).
You pay tax
is you make money from: Doing business (trading profits) Investments Selling assets (for more than you paid)
it looks like you don't do any of those, so you don't need to file for taxes.
There is another exemption that you don't have to file if it is likely that you would owe less than a hundred pounds taxes, which would also probably apply to you.
There are many thousands of clubs and societies in the UK that don't need to register for tax purposes, so you are far from alone.
It is probably worth creating an actual club ("Captain Insanity Server Club") and keeping records of donations and expenses for the server.
There isn't any need to legally incorporate or anything like that, though you might try having a separate bank account for it if you can get a free one, so that if the tax authorities ever audit you personally you can show them that the donations you received weren't income to you.
money.stackexchange.com/users/1851/DJClayworth
Yes if you do it as a hobby, as it's still income.
But it should be something you can offset against tax
Either way, you shouldn't be doing this as you, you should either register as self employed or create a company.
You register this income as self-employed income (or income of the company) and offset the expenses of running the server against tax.
In the UK, companies (or self employed people, which are basically companies) pay tax on profit not income (unless VAT applies, in which case they're basically just passing the VAT on for their customers).
Since you're not making a profit over the whole year (even if some months are profitable)
you will pay no tax.
money.stackexchange.com/users/6877/Jon Story
I suspect that the new VATMOSS rules come in to play here.
So you owe VAT for donations from EU countries, providing you are below £81k
there would be no UK vat payable though, however then you couldn't recoup the vat you paid out.
Note
I am not an accountant
but I did speak to one this week about a similar issue.
money.stackexchange.com/users/29748/Ian Turton
I would assume that under a certain threshold, HMRC doesn't even want to hear from you, because extracting taxes from you costs them more money than you are going to pay.
On the other hand, I cannot find anything written about that subject.
I'd suggest to call them at 0300 200 3300 and ask them.
Have the annual cost of the server ready, and tell them that you will stop asking for donations if say 6 months of cost is covered.
There may be an official threshold that I was unable to find.
Obviously if you receive £1000 in donations and spend £100 for the server, they will want tax payment.
If its £110 in donations and £100 for the server, they will likely not care.
If they tell you to register as self-employed, it's not difficult, just a bit of a pain.
In that case you'd have to pay tax on your income (donations) minus cost (cost for the server and any other cost).
money.stackexchange.com/users/13791/gnasher729
Unless you are a tax-exempt entity and running this server is clearly within your mission statement: YES, it's taxable income.
Sorry.
money.stackexchange.com/users/12439/keshlam
Basically I am considering starting a game server that has optional donations for people to gain little perks.All the money donated will go towards the upkeep of the server, and any excess will go towards paying for the months that donations aren't enough to cover all the costs.  Will there be any taxes on this money I receive?  Note: All transactions will be done through Paypal, and I live in the UK.
If I receive donations to keep a server running, do I need to pay any taxes?
money.stackexchange.com
<taxes><united-kingdom>
money.stackexchange.com/questions/49079
money.stackexchange.com/users/29712/Captain Insanity
You would be required to register as self-employed. You could offset the expenses of running the service against tax. If you are trading you are legally required to register as  self-employed. A key feature as to whether is classed as trading is whether you are aiming to make a profit or not. There are thousands of clubs and societies in the UK that are not required to register for tax purposes. In the UK, companies or the self-employed pay tax on profit, not income, and the expenses for running the server can be offset. HMRC may not even be interested in profit under a certain threshold. However, if e.g. you receive £1000 in donations and spend only £100 for the server, they will want tax payment. So, unless you are a tax-exempt entity, this will be taxable income.
If you are trading you are legally required to register as  self-employed. A key feature as to whether is classed as trading is whether you are aiming to make a profit or not.   There are thousands of clubs and societies in the UK that are not required to register for tax purposes. In the UK, companies or the self-employed pay tax on profit, not income, and the expenses for running the server can be offset. HMRC may not even be interested in profit under a certain threshold. However, if e.g. you receive £1000 in donations and spend only £100 for the server, they will want tax payment. So, unless you are a tax-exempt entity, this will be taxable income.