If you’re a digital content creator or influencer in the UK, unsure about your tax responsibilities, you’ve come to the right place. There is no official term for the tax you would have to pay. ‘Blogger Tax’, ‘YouTuber Tax’, ‘Influencer Tax’ — regardless of the term, to pay taxes, you would have to register yourself as a self-employed individual and declare your income to the HMRC.
Whether you post regular vlogs on your YouTube channel, run an Instagram account with paid or sponsored content, stream video games on Twitch, or have a blog where you write reviews or guides, you earn fees/royalties from it or receive gifts (products, accommodations, or holidays). This is your taxable income, and you have to submit a self-assessment tax return on it.
Both part-time and full-time influencers have to register with HMRC as self-employed. Even if you’re employed full-time and work part-time as a digital creator, you still have to pay taxes on your online income. The amount you pay as income tax will depend on the income you’re earning above the Personal Allowance, which is tax-free.
The UK tax system is highly complex. In this tax guide, we’ll take a look at taxes for UK Digital Content Creators and Influencers. We’ll also be discussing registering your business and allowable expenses. To learn more about how taxes work in the UK, schedule a tax accountant consultation in London or Walsall with IBISS & CO.
What Are Online Influencers?
In the last decade, we’ve seen a rise in digital creators. These are vloggers, bloggers, or influencers who have become a part of this new industry worth $1.10 billion in the UK and worth $21.3 billion globally.
This new entrepreneurial trail has created a highly lucrative industry from downtime hobbies like posting social media blogs, videos, or photos. People doing these things for fun or as a hobby have now taken it up as their part-time or full-time jobs from which they earn.
Social media has provided a full-time job to this generation of digital creators. Milelnoans wanted to be pop stars or sports athletes. But now, most kids dream of becoming famous ‘YouTubers’ instead of choosing any other career path. However, what is a digital creator or ‘influencer’?
Under the umbrella term “influencer” comes a variety of disciplines, including vloggers, bloggers, fitness gurus, content creators, DIY crafters, and much more. Online influencers use different social media platforms like Instagram, TikTok, and Youtube. Many of them have reached dizzying heights of fame and a huge number of followers on their chosen platforms.
Influencers have been using their online following and presence to ‘influence’ people’s actions, opinions, or consumer choices. If a ‘YouTuber’ uploads a video about a certain product or service, the community they are targeting will be inclined to purchase it. With a large number of views or subscribers, they will be able to monetise their videos.
Since the industry remains unregulated, there are no tax regulations for them either. However, to pay taxes in the UK, digital content creators and influencers must register as a business or self-employed.
Registering Social Media Account or Blog As a Business
Many digital creators and online influencers use their social media accounts, blogs, or websites as artistic outlets. However, as they start to gain a following and their hobby evolves into a job, they begin earning money from it.
According to HMRC, if you are earning income, you will be viewed as a business. This means if your income exceeds the tax-free Personal Allowance limit of £12,500, you will be liable for taxes. However, it depends on whether you want to register and submit your self-assessment for tax returns.
Suppose you’re not sure about registering yourself as a business. In that case, you can take a look at the following questions and go over your tax liabilities with the best personal tax advisors in London or Walsall at IBISS & CO.
- Motivation: If you’re generating income, do you want to make your account or blog your full-time job?
- Gifts: Have you been accepting product gifts for promotional posts or accommodations for a paid partnership? Gifts are assessable by HMRC under Income Tax (Earnings and Pension) Act 2003.
- Advertising: Do you promote other companies on your account or blog or intend to do so?
- Monetisation: Have you been using a monetising strategy to compensate for your time and effort invested and earn income from your platform?
- Guest blogging: Do you promote yourself on other websites to boost traffic?
Registering as Self-Employed
When it comes to taxes for UK digital content creators and influencers, it’s essential that you get the tax obligations right. Since blogging, influencing, and digital content creation are new business areas, you need to avoid time-consuming and costly tax investigations or disputes by the HMRC.
The government has now been taking a look at these business areas. The fastest way to declare your income is by registering yourself with HMRC as self-employed. You won’t have to pay taxes if your income doesn’t exceed during the 2022/23 tax year (6th April 2022 – 5th April 2023).
However, once it exceeds £1,000, you would have to submit your Self-Assessment tax return by the following year. For the tax year 2022/23, your self-assessment tax return’s deadline would be 1st January 2024.
HMRC will be calculating the tax you owe. This is an automated process, and it will depend on the information you’ve entered. The expenses, tax reliefs, and allowances will be deducted before calculating your tax liability.
In case you’re also employed somewhere else, it won’t be a part of the rules for any other PAYE salary. If you’re earning regular payments from one company instead of different brands, you won’t be considered self-employed and will be classified as employed. In such cases, make sure you consult a personal tax advisor.
For the tax year 2022/23, you need to declare your self-employment status by 5th October 2023. This means informing HMRC that your earnings for this year have exceeded £1,000, even if you have stopped receiving income from your account or blog. For tax savings in the future, you can also add your expenses to the tax return, which would create a loss.
Registering as a Limited Company
Usually, most digital content creators like vloggers and bloggers are self-employed to avoid issues related to taxes for UK digital content creators and influencers. However, some of them do register themselves as a limited company. There are many benefits to setting up a limited company.
It provides creditor protection and additional tax relief. You will have to decide if this suits your business, your individual needs or circumstances, your career growth, your income potential, and your projected salary. There are some reporting responsibilities that this comes with. To discuss that with an expert, consult personal tax advisors in the UK at IBISS & CO.
Taxable Income for Influencers
As a digital content creator or influencer, you must be receiving compensation for talking about a product or service. If you write posts on your social media account or blog, you might also receive gifts (not cash).
Gifted products will also be a part of your taxable income. You need to include everything in your self-assessment tax return. The pricing of the products can vary depending on the retail price, market value, or real value.
Discuss this and taxes for UK digital content creators and influencers in detail with a qualified professional during a tax accountant consultation in London or Walsall. Make sure you have contracts with brands and companies verifying the costs of gifts sent to you.
The rules for taxes for UK digital content creators and influencers are complex. If you have been sent an item without an agreement or unexpectedly, you don’t have to report it in the tax return as income. However, if a gift creates revenue, discuss this with your personal tax advisor.
Types of Taxable Income For Influencers
- Marketing or advertising fees and royalties.
- Commissions through affiliate marketing.
- Guest blogging.
- Subscription services on your social media accounts.
Allowable Business Expenses
You can reduce your tax liability through allowable business expenses if you’re a self-employed influencer or digital content creator. You can claim these expenses, effectively decreasing your tax bills. Here are some tax-deductible expenses.
- Marketing costs: This can include hosting, website creation, online SEO, and PPC advertising
- Equipment: Computers, cameras, laptops, phones, software purchases, subscriptions
- Insurance: For the equipment you purchase.
- Mileage and Travel expenses: Airplane or train tickets, hotel stays away from your office or home, and work-related fuel costs.
- Subsistence: Entertainment, food, and drink if incurred as a business expense.
- Using your home office: When you’re working from home.
- Utility bills: Broadband costs and phone bills when you’re working from home.
- Subcontractor costs: Hiring photographers, consultants, video editors, or any other freelancers.
- Professional fees: Hiring legal counsel, tax advisors, chartered accountants, travel agents, etc.
- Licensing and recording fees: Using backtracking and/or professional studios for your posts.
- Makeup, clothing, and hair costs: Used for work photoshoots or video shoots.
- Bank charges: Only from your business bank account.
You can not deduct expenses like parking fines, personal expenses, and HMRC penalties and interest. Some expenses are also incurred by yourself and your business as well. This includes your mobile phone bills or fuel expenses in your personal car. In this case, you can claim 70% of bills for business and 30% for personal use.
Working Abroad
If you get an international client, such as a hotel review or photoshoot, you will be liable to pay taxes in that country and UK tax. However, you can claim tax relief on the self-assessment tax return, so you’re not paying taxes twice.
Bookkeeping for Influencers
Keeping records is important for all businesses, self-employed individuals, and limited companies. As an influencer, you need documents to support your income and expenses. This is a legal requirement, so ensure you have sorted your agency statements, receipt expenses, client invoices, and bank statements.
Keep these records even after submitting everything during a tax year for at least six years. This will help you avoid tax investigations or disputes in the future when HMRC starts to doubt your tax return figures and asks for evidence.
By April 2023, Making Tax Digital (MTD) rules will also come into play. You would be required to maintain your digital tax records, and this would be done using MTD-compatible online software.
Filing for VAT Return
Value Added Tax (VAT) is levied on goods and services sold by a business. It’s a government tax, and if you are registered as a business with a turnover reaching or exceeding £85,000, you need to start charging VAT to your customers. If you’ve been paying VAT to your suppliers, you can deduct the amount you’ve paid from the amount you charge and then submit your quarterly VAT returns.
Need Content Creation Tax Advice?
We understand how complicated UK taxes can be. Especially if you’re a social media influencer or digital content creator, the tax rules can be somewhat cloudy. Our team of experts at IBISS & CO. have worked with a variety of business and self-employed individuals, including social media personalities and influencers.
Our team of chartered accountants and tax advisors understands taxes for UK digital content creators and influencers. We’ll go over your work and financial records to determine the tax amount you owe. You can rest assured that we’ll work to minimise your tax bills, so you don’t have to pay too much. We’ll be working with you to decide what you should disclose to HMRC.
At IBISS & CO., we streamline the process of reporting earnings and claiming deductible expenses. We hope this guide was of help to you. For more help or information, you can consult us today for a tax accountant consultation. We have the best tax advisors in London and Walsall who are happy to help you!
