Filing Taxes as an Influencer?
Your Top 10 Guide to Self-Assessment
Income Tax in the UK can be complex and confusing.
Our UK Income Tax system is a self-assessment system, meaning that the onus is on individuals to calculate their taxable income and resulting tax liabilities. This also means that if you get your reporting wrong, you are personally liable to pay any interest and penalties that arise from the incorrect reporting.
This can be a lot of pressure, and we appreciate it’s not always easy to know where to start.
We have put together a list of the top 10 tips for UK-based influencers to consider when thinking about their Income Tax reporting:
1. Hustle, brand, business, trade - what's the difference?
Plenty of words get thrown around when discussing influencers and the way they make money and live their lives. All these words mean roughly the same thing: a way to market yourself and earn cash.
There have been cases brought to Courts in the past trying to identify exactly what is a trade and what isn’t. Generally, if you are putting time and effort into promoting a product (be it your brand, your beauty tips, your personality, your video game skills etc.) and making it ‘saleable’, then you are likely to be a business or trade, and if you make enough money, it will be taxable income. HMRC has plenty of guidance on what is a trade and what isn’t, so ensure you have read through it in detail.
But even if you simply do these things as a hobby, you need to be careful, as even if something isn’t a trade or a business and simply a hobby, it can still be taxable if you’re earning a certain amount.
2. So, what is income?
Judging what is income for influencers is anything but straightforward. Influencers may receive income as cash payments from brands or as payments from fans for products. These payments may be contractual payments for fulfilling some promotion or simply a gift received from a TikTok live from a faithful fan.
All of these things, if received because of your influence, can be income and may need to be taxed.
What about gifts from unaffiliated brands or trips sponsored by companies? You will need to be careful in these situations as ‘payments in kind’ can be taxable, whereby an amount (doesn’t need to be cash) is paid to an influencer and is still deemed to be taxable income.
The rules are complex, and advice might be needed down the line.
3. Do you work for yourself or someone else?
Another aspect to consider is that you may not be self-employed at all. Actors, actresses and newsreaders have gone to Court many times to determine if they are self-employed or employed as typically their situations are not as simple as, say, office workers who show up at the same place every day, do contractual work and collect a monthly salary.
As different obligations go along with being self-employed or employed, it’s important to correctly identify if any contracts or agreements you have with brands that may constitute an employment relationship.
4. Do you have work-related expenses?
Whether you are employed or self-employed, if you incur expenses in relation to your work, you may be able to deduct them from your income and reduce the taxable amount. This is very advantageous as, it can help you to grow your business, whilst limiting your tax bill to the amounts that don’t get reinvested into the business straight away.
Employment expenses are less common than self-employment expenses and decidedly more limited, and it would be advisable to get advice on any expenses before you claim them.
If you are self-employed, you can claim an allowance of £1,000 which can offset your income for the year. This is claimed instead of expenses however, so if you have incurred over £1,000 in allowable expenses, it would not be beneficial to use this.
5. Are you making a self-employment profit?
If you are self-employed and you are making more money than you are spending, you may need to pay tax on the profits.
You will also need to register for Self-Assessment and may need to pay National Insurance contributions.
6. Everyday spending vs business expenses?
You need to be aware that not every expense you incur in putting together your brand is allowable. If you spend money on things you use in your business, but you also use them in your everyday life, the relief will be restricted, as these expenses are not wholly and exclusively for the purpose of your business. They have a duality of purpose, which means they are not wholly allowable.
For example, buying a camera that you use to create content would likely be an allowable expense, as well as any lighting and props that are used solely for your content creation.
But buying clothes or makeup that you use for a couple of pictures and then wear every day because you like the way they look would likely not be allowable.
As influencing can be a kind of lifestyle, this line can be blurred and allowability of expenses can be harder to figure out. We recommend reaching out to an advisor if you need any help.
7. Do you need to do a Tax Return?
If you make profits from your Self-Employment, you will need to report them on your Tax Return; however, there are a few things you need to be aware of.
Firstly, if you make less than £1,000, you do not need to do a Tax Return. If you make more than £1,000, you will need to report it on a Tax Return.
Currently, there are plans to change the system slightly so that if a taxpayer earns more than £1,000 but less than £3,000, they will be able to report the taxes online, rather than needing to do a formal Tax Return. These rules have not yet come into place yet but be aware that reporting changes can happen.
The Tax system is a self-assessment system, so keeping yourself up to date with changes is important.
8. Think about your structure?
It’s a common belief that to be an entrepreneur, you need to own your own company, but this is not true for every business. If you are running a successful business, it’s important to get specific advice about your structure to check you are running in the most tax-efficient way. Setting up a company can have tax benefits, but it may not suit everyone.
Similarly, if you work with someone else, there may be benefits to setting up a partnership structure and formalising that arrangement.
9. Do your social media posts match your tax records?
Are you posting pictures of expensive cars and meals on Instagram and TikTok, or brand deals and sponsorships that you are not reporting on your Tax Return?
HMRC have been known to approach taxpayers and ask questions if they have reason to believe these individuals are reporting incorrectly or deliberately hiding their income.
Get professional help putting together your accounts and tax reporting so you don't make mistakes.
10. Pragmatic Tax planning
Most employees have tax deducted from their wages at source, so they don’t have to do anything as far as filing annual Tax Returns. Employee tax records are put together by employers and sent out to employees whenever their payslip comes in.
If you are self-employed, you need to think about putting part of your income away now, to pay the tax bill that comes later. If you make money in the 2024/25 tax year, you will be completing the Tax Return during the 2025/26 tax year and only paying tax in January 2026. This is almost two years from when you earned some of that income! It can be really hard to keep track of it. We recommend putting an amount aside now to pay the bills later and using dedicated accounts to keep the amounts separate.
HMRC has also introduced Payments on Account which collect half of your predicted Income Tax and National Insurance liability in advance – in January and July.
We also recommend using software to track of your receipts and keep records of everything – this means that, in the event of HMRC asking questions, you will already have the answers at your fingertips.
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