With the rise of social media platforms, influencers have become an integral part of the UK economy, contributing significantly to the advertising industry and the digital landscape. As a result, many influencers now earn substantial income through brand collaborations, sponsored content, affiliate marketing, and even launching their own products. With this income comes the responsibility of understanding tax obligations. So, the question arises: Do influencers pay taxes in the UK?
The short answer is yes. Like any other profession, influencers must comply with UK tax laws and regulations. However, because influencer income is often generated from various sources, it can be challenging to understand the specific tax implications. This guide will help influencers in the UK navigate their tax obligations, understand the importance of timely filing, and ensure they stay compliant with HMRC (Her Majesty’s Revenue and Customs).
What Taxes Do Influencers Have to Pay in the UK?
Influencers in the UK are considered self-employed, which means they are responsible for paying their taxes independently. The tax obligations for influencers can be broken down into three key categories:
1. Income Tax
Influencers must pay income tax on their earnings that exceed the personal allowance. For the 2024/2025 tax year, the personal allowance is set at £12,570. This means if an influencer’s total income surpasses this amount, they will need to pay income tax on the excess income according to the applicable tax bands:
- Basic Rate: 20% on earnings between £12,571 and £50,270
- Higher Rate: 40% on earnings between £50,271 and £150,000
- Additional Rate: 45% on earnings above £150,000
It’s essential for influencers to track all their income sources sponsored posts, affiliate commissions, merchandise sales, ad revenue, and other business activities because they are all subject to income tax.
2. National Insurance Contributions (NICs)
In addition to income tax, influencers are also required to pay National Insurance Contributions (NICs) to qualify for benefits such as pensions and social security. There are two types of NICs that self-employed individuals pay:
- Class 2 NICs: If an influencer’s profits are above £6,725 per year, they must pay Class 2 NICs, which are a flat rate of £3.45 per week.
- Class 4 NICs: If an influencer’s profits exceed £12,570, they will also need to pay Class 4 NICs at a rate of 9% on profits between £12,570 and £50,270, and 2% on profits above £50,270.
These contributions are essential as they contribute to benefits like state pension, maternity leave, and more. They are paid in conjunction with income tax through the Self-Assessment process.
3. VAT (Value Added Tax)
If an influencer’s taxable turnover exceeds £85,000 within a 12-month period, they must register for VAT. This applies to income generated from activities such as selling products, services, or charging for access to premium content. Influencers need to account for VAT on their income and may also reclaim VAT on eligible business expenses.
However, if the influencer’s total income is below £85,000, they don’t need to register for VAT but can choose to voluntarily do so if they wish.
How Do Influencers Pay Taxes in the UK?
The process for paying taxes in the UK as an influencer can be broken down into the following steps:
1. Registering with HMRC
Influencers must first register with HMRC as self-employed. You need to do this by 5 October of the year in which you start earning income as an influencer. This registration will allow you to file a Self-Assessment tax return, which is required annually. Upon registration, you’ll be given a Unique Taxpayer Reference (UTR) number, which you’ll need to include when filing your taxes.
2. Filing a Self-Assessment Tax Return
Each year, influencers must file a Self-Assessment tax return to report their income and expenses to HMRC. The deadline for submitting the tax return is usually 31 January, following the end of the tax year. For example, for income earned during the 2023/2024 tax year, the tax return must be submitted by 31 January 2025.
When filing, influencers must report all income, including revenue from brand partnerships, affiliate links, ad revenue, and any other business-related earnings. They can also deduct eligible business expenses, which can lower their taxable income and reduce the amount of tax owed.
3. Paying Taxes
Influencers are required to make tax payments in two instalments through the Payments on Account system. The first payment is due by 31 January (the same day the tax return is due), and the second payment is due by 31 July. These payments are based on the previous year’s income, so it’s essential to keep enough funds aside to cover these payments.
If there is any outstanding tax due, it must be paid by 31 January.
What Expenses Can Influencers Claim?
As a self-employed individual, influencers can deduct a variety of business expenses from their income, thus reducing their tax liability. Some common allowable expenses include:
- Equipment Costs: Cameras, lighting, microphones, and editing software that are used to produce content.
- Travel and Accommodation: Expenses for travel to events, brand meetings, photoshoots, and overnight stays related to business activities.
- Marketing Costs: Social media advertising, influencer marketing services, and content creation tools.
- Professional Services: Fees for accountants, legal services, and any consultancy needed to maintain your business.
- Home Office Costs: A portion of utilities like internet, electricity, and rent if you work from home.
It’s important to keep detailed records and retain receipts for all expenses to justify your claims to HMRC.
Hiring an Accountant for Influencers
While many influencers may feel confident about managing their tax affairs, hiring an accountant who specialises in influencer finances can be a smart move. An accountant will ensure that you comply with tax laws, file your tax return correctly, and help you maximise your allowable expenses, ultimately saving you money. They can also offer expert advice on VAT registration, self-assessment submissions, and tax planning strategies.
Conclusion:
To answer the question, Do influencers pay taxes in the UK?—the answer is yes. As a self-employed individual, influencers are obligated to pay income tax, national insurance, and potentially VAT, depending on their earnings. To avoid tax issues, influencers should stay informed about their tax obligations, keep thorough records, and file their returns on time. By being proactive about their finances, influencers can focus on growing their brand while staying compliant with HMRC regulations.
For tailored advice and expert assistance with influencer tax matters, consider reaching out to a professional accountant who understands the intricacies of influencer marketing and its tax implications.
Disclaimer: The information provided in this article is for general informational purposes only. It is not intended to constitute tax or legal advice. For personalised advice regarding your specific tax situation, please consult a qualified accountant or financial advisor.