As it stands, there is currently no such thing as Influencer Tax. However, whether you consider yourself a blogger, vlogger or online influencer there will be tax implications attached to your profession.
Much the same as any business owner or self-employed individual, influencers have to declare their earnings to HMRC. Regardless of the hours you put in, if your income or earnings exceed a certain threshold, you will owe tax on them. Find out more about influencer tax responsibilities below.
What is an online influencer?
Effectively an influencer is someone who creates content or promotes a lifestyle which appeals to an audience who then in turn follow their ongoing content production and promotion across social channels.
Influencers use this online presence through their content, be it; articles, videos and/or social media posts to ‘influence’ their followers’ opinions, actions, and consumer choices. A YouTuber for example uploads videos to YouTube with the aim of attracting and entertaining viewers and growing a community.
Those with high volumes of views and subscribers are then able to monetise this, either through ads on their videos or brand collaborations. This is why becoming a ‘YouTuber’ is now a recognised ‘dream job’ amongst many children.
How much money do influencers make?
Tens of thousands of people in the UK earn revenue from their online content every year.
Footballer Cristiano Ronaldo earns an estimated £1.7m per sponsored Instagram post after the Man United star became the first person to pass 400m followers.
However, as we know you don’t need to be famous at the start of your social content journey, you just have to make an impression. The online influencer marketing is thriving. More and more bloggers, vloggers and YouTubers, are turning their hobbies and interests into a monetised profession. For example, an Instagram account with over 30,000 can make around £750 per sponsored post.
It’s important for influencer’s followers and their personal authenticity to strike the right balance between the paid for and organic collaborative content they post for brands. This engaging content will grow their follower base and in turn their income. And as we know with personally generated income comes tax responsibilities.
When do influencers need to declare their earnings?
Influencers who generate income from their activities are recognised as self-employed and as such are entitled to a tax-free Personal Allowance of up to £12,570 per year.
Like all self-employed workers across the UK, they won’t owe tax on earnings up to this threshold but do still have to complete a Self-Assessment.
Content creators and influencers must declare any income generated over the tax-free allowance on their self-assessment. HMRC are ever evolving their methods of detecting income generating businesses and if you are out there as an established business you will get noticed. Our advice, register with HMRC as soon as you start to generate revenue.
How much tax do online influencers need to pay?
Firstly, its crucial to know exactly what you’ve earned (and how you’ve earned it). This is in order to workout exactly what you owe.
Its worth noting all gifts and re-numeration connected to your channel posts and documenting these. As in 2019,the Competition and Markets Authority (CMA) clamped down on influencers about the transparency of their endorsements and sponsored posts, putting guidelines in place;
“The CMA considers payment to be any form of reward, including money, gifts of services or products, or the loan of a product.”
Whether full time or part time, influencers must register with HMRC as self-employed, even if you’re a PAYE employee elsewhere. You must still pay tax on the income you’ve earned online.
The amount of income tax you pay as a blogger or influencer depends on how much of your income is above the tax-free Personal Allowance of £12,570. To get an idea of how much tax you will need to pay you can use the self-employed ready reckoner.
Can an influencer claim expenses?
Yes, a registered self-employed influencer can claim certain expenses for their daily work. This helps reduce taxable income, and in turn a lower annual tax bill. Expenses which could potentially be claimed include;
- Equipment(phones, laptops, cameras, etc.)
- Travel expenses
- Phone & broadband bills
- Website expenditures
- Marketing costs
- Related training / courses
Online influencers may also qualify for certain types of income tax relief, depending on their circumstances. It’s worth speaking to a professional accountant or tax advisor for confirmation on this.
Do influencers declare ‘Payments-In-Kind’?
Due to the lack of transparency when it comes to adverts, distinguishing paid partnerships from organic content relies heavily on declaration by the influencer.
Its easy to tax sponsored content when a set fee is agreed by both parties, although it can become cloudy when it comes to payments in kind (PIK). Payments in kind are non-cash gifted items such as products or experiences given to an influencer in return for contracted posts or content. This can be anything from a book to an all-inclusive holiday abroad. If it’s a gift in exchange for endorsement, it’s considered a payment-in-kind.
You’re legally obliged to declare the financial value of any items you receive as a payment-in-kind, in your annual tax return as you will owe tax this value. Our advice, secure written agreements that set out your relationship with brands offering PIK, verify the cost of the item or service, get it in writing on the contract before you sign it and make sure you obtain a hard copy of the agreement in case HMRC want to see it.
Hire a Specialist Accountant
If you’re an upcoming influencer and this all sounds a little complicated, don’t worry. Secure the services of a professional accountancy for your tax returns.
Blue Rocket Accounting have helped numerous businesses and individuals (including influencers like you) with their tax returns. That experience, combined with our dedicated service, means you’ll spend less time dealing with complex tax affairs and more time creating killer content. What’s more, with our digital accounting solutions, you can combine the latest cloud-based technology with a traditional, personal accountancy service.
So, if you’re a blogger, YouTuber or online influencer and you require support or information on tax returns and HMRC registration, sign up now. We’ll build your accountancy service around you.
Call today on 01322 555442 or email firstname.lastname@example.org.