The rise of influencers may be a relatively recent profession, but if you're an online content creator and it's shifted from being just a hobby, to earning money or receiving gifts, then you could be liable for a tax charge!
This may then lead to the following questions:
How much of your influencer income is likely to be taxed?
Do you need to submit a self-assessment tax return?
Depending on your circumstances, the above may apply, and if it does, there is in fact some good news. There are certain expenses you can potentially deduct from your earnings, to help reduce your tax liability and maximise your disposable income. Read this blog to understand:
In this blog we cover:
If your income from influencing, or content endeavours, is in excess of £1,000 for the tax year (which runs from 6 April to 5 April the following year) then you'll be liable for tax. This means you'll need to set yourself up as a self employed individual, and fill out a tax return by 31 January of the following year.
The tax you owe is then calculated by HMRC based on the income figures your enter in. Based on what you supply, this will also take into account available tax allowances, reliefs, and expenses.
You may be employed, and doing influencing work as a side hustle, outside of your hours of employment. However, your employment is entirely separate and dealt with through your PAYE salary. This means once your influencing income breaches the £1,000 threshold, you'll need to register as self employed. When this happens your status could be both employed, and self-employed.
There is a deadline to register by 5 October following the end of the tax year in which your earnings exceeded £1,000 and therefore inform HMRC of your self-employment status.
Depending on your income level and likely future earnings, there may be tax benefits to registering your work through a limited company. This can potentially provide additional tax benefits and protection from creditors (people who have lent your business money).
However, it does also come with additional reporting requirements including filing accounts, and declaring dividends among other things. It is worth seeking professional advice to understand if this might be the right move for you based on your current and future earnings.
It may surprise you to learn that many gifts count as taxable income. If you're receiving these to blog, or film about them, on behalf of a brand then they have to be included in your tax return.
This means you need to verify from the supplier, the cost of the product(s) in question and you need some sort of contract stipulating when you should promote it, and for how long. The value, how it's calculated, and what gifts need to be reported can get quite complex so you may need to obtain professional help on such matters.
Areas of taxable income typical to influencers include:
The below are areas to explore to understand if these expenses are relevant to you, meaning you may be eligible to deduct them. Essential to all of this is good record keeping, storing evidence of all expenditure in the form of bills, receipts, bank statements, and invoices. You have a legal obligation to keep hold of these for 6 years after filing your tax return.
If you use a space in your home for your influencer, or content creation, work then it may be possible to claim a portion of some of home office expenses. This can be done on a proportional basis of actual costs incurred, or under HMRC flat rate deductions. Please note that claiming home office expenses on a property that is your principle private residence could have an impact on any capital gains tax reliefs available if you subsequently come to sell the property.
There's likely to be various tools, equipment, and software products that you rely on, and use, to create the content that engages your followers, and audience. Consider things such as laptops, computers, cameras, phones, video editing software, lighting equipment, microphones, tripods, audio editing software, and subscriptions to online software services.
These are deductible so long as they are used for business purposes only. Also consider claiming on the insurance for some of your equipment.
Do you make use of professionals such as photographers, videographers, graphic designers, social media managers, booking agents, freelancers, accountants, or lawyers? If so, their fees may be deducted for tax purposes as business expenses. How to classify such expenditure can be complex, so it may be wise to consult with an accountant.
It is likely essential to your personal brand to promote your content far and wide to potentially relevant audiences. Think website creation, sponsored posts, social media adverts and pay per click, search engine optimisation, collaborations, and promotional items. All these could qualify for potential tax breaks.
Do you attend conferences, events, or have to travel as part of your creative endeavours? If so then things such as airfares, car rental, taxis, bus and train tickets, fuel costs, hotel rooms and property rental away from your home and place of work, and meals, are all potential deductions.
Are you investing in your professional development through some form of training? Whether it's courses, workshops, seminars, or conferences, so long as they enhance your knowledge, and skill set, then this is potentially deductible. Of note, make sure you keep records of all educational material costs.
Stationary, postage, subscriptions, and even shipping fees all qualify. Also consider website hosting costs and bank fees.
You may have to purchase various items to help create and develop your content. Investment in these things may be essential to your creative process and is tax deductible so long as they clearly relate to your specific business activities. Makeup, hair, and clothing qualify. As does purchasing music for content, and hiring studios.
If your turnover hits, or exceeds, £85,000 then you'll need to register for VAT. You'll also need to submit VAT returns quarterly, charge customers VAT, and also deduct VAT from payments made to suppliers.
It's also important that you're aware that new MTD rules come into effect from April 2024. This means it will be necessary to maintain digital records that are MTD compatible.
If your work takes you abroad then depending on the jurisdiction, you may have to pay tax in that country as well as in the UK. You'd then have to claim this back, or some of it depending on the arrangements, through your tax return. Again, it's worth taking professional advice on such matters prior to committing to the work.
Understanding the above, and applying it in your tax return could be key to helping you reduce your tax burden. It pays to use an accountant, or tax professional, who is very well versed in such matters and can help you decipher which tax breaks you're actually eligible for. You can then focus purely on your creative pursuit, safe in the knowledge that these matters are being looked after in a legally compliant manner, while your tax profile is also being optimised.
Keeping organised records will ensure for an accurate tax return and that you don't pay more tax than you need to. This is also essential should you be unfortunate to be randomly chosen for an investigation by HMRC. It will ensure there aren't any discrepancies and you're not subject to potential fines, or penalties.
The content of this post was created on 01/09/2023.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
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