In today’s digital world, influencers are becoming an integral part of marketing strategies. Whether it’s a small business or a large corporation, influencers can significantly impact brand awareness and sales. However, as influencers take on larger campaigns and more collaborative projects, they often need to form teams or hire professionals to assist them. This brings forth various financial responsibilities of hiring team as influencer. Understanding these financial duties is crucial not only to ensure compliance with tax laws but also to manage your business effectively.
The Financial Responsibilities of Hiring Team as Influencer
Influencers often think that their primary responsibility is to create content and build relationships with their audience. While that’s true, when they expand their operations, particularly by hiring people, there are additional layers of responsibility. These include financial and tax obligations, especially in the UK, where HMRC (Her Majesty’s Revenue and Customs) governs tax regulations. This blog will explore the financial responsibilities of hiring team as influencer, offering insights on how influencers can remain compliant while running a successful business.
Why Influencers Hire Teams
As your platform and audience grow, so does the complexity of managing your content, collaborations, and finances. Many influencers find it necessary to hire a team to manage their work. This might include roles such as:
- Content managers
- Videographers or photographers
- Social media managers
- Accountants or financial advisors
While hiring a team allows influencers to focus on the creative side, it also means taking on new financial responsibilities. These responsibilities include paying salaries, managing tax obligations, and maintaining compliance with UK employment laws.
Things to consider while hiring teams
1. Determining Employment Status
Before diving into specific financial obligations, the first step is determining the employment status of the people you hire. The HMRC distinguishes between employees, freelancers, and contractors, and each of these categories comes with different tax and financial obligations.
For instance:
- Employees: If someone works exclusively for you, under your control, and with set hours, they are likely classified as an employee. As an employer, you’ll be responsible for paying National Insurance Contributions (NICs) and ensuring PAYE (Pay As You Earn) is deducted from their salaries.
- Freelancers/Contractors: If the person is self-employed, they manage their taxes independently. However, as the hiring influencer, you still need to ensure they are registered as self-employed with HMRC.
Being able to classify your team members correctly is one of the critical financial responsibilities of hiring team as influencer. Incorrect classification can lead to significant penalties from HMRC, including back taxes, interest, and fines.
2. Setting Up Payroll
If you have employees, the next step is setting up a payroll system. This is essential to ensure that your employees are paid the correct amount and that the appropriate taxes are deducted from their pay. You will need to:
- Register as an employer with HMRC: Once you’ve classified your workers as employees, you must register with HMRC as an employer. You will need to report employee payments to HMRC using payroll software.
- Deduct Income Tax and National Insurance: As an employer, you are responsible for deducting Income Tax and National Insurance from your employees’ salaries. This is done through the PAYE system. You must ensure that the correct amount is deducted and paid to HMRC on time.
- Contribute to National Insurance: You are also responsible for paying a portion of your employees’ National Insurance. The rate depends on how much your employees earn.
Handling payroll and complying with the relevant regulations is one of the significant financial responsibilities of hiring team as influencer, as failure to comply can result in hefty fines.
3. Pension Contributions
Under UK law, every employer must offer a workplace pension scheme. If you are hiring a team as an influencer, and your employees are over 22 years old and earn over £10,000 annually, you must enrol them into a pension scheme. As part of your financial responsibilities of hiring team as influencer, you are required to:
- Automatically enrol eligible employees into a pension scheme.
- Contribute to the pension scheme on behalf of your employees.
- Ensure that the pension contributions are paid on time and comply with regulations.
- Pensions are often overlooked by influencers who hire small teams, but failing to provide the correct pension scheme can lead to legal repercussions and penalties from the Pensions Regulator.
4. VAT Considerations for Influencers
Once your income exceeds £85,000 per year, you are required to register for VAT (Value Added Tax) in UK. If you’re hiring a team and your revenue is high enough, VAT is something you’ll need to account for. As part of your financial responsibilities of hiring team as influencer, you must ensure that VAT is applied to the services you charge for and that it is paid to HMRC accordingly.
Moreover, if your team members are contractors or freelancers who charge VAT on their invoices, you need to ensure that their VAT registration is valid and that you correctly account for the VAT in your financial records.
5. Managing Expenses and Allowable Deductions
When you hire a team, managing business expenses becomes more complex. Many influencers find that, after hiring, they have a mix of personal and business expenses. You need to separate these and ensure that only legitimate business expenses are claimed.
Typical business expenses may include:
- Salaries: Payments made to employees and freelancers.
- Office space: If you rent office space for your team, this is a deductible expense.
- Equipment: Laptops, cameras, or software used for creating content.
- Travel: If you or your team travel for business purposes, these costs can be deducted.
It is important to keep detailed records and receipts of all expenses. This is not only good practice but also necessary if HMRC ever audits your finances. Properly managing expenses is a critical part of the financial responsibilities of hiring team as influencer, as it ensures you comply with tax laws and avoid penalties.
6. End-of-Year Tax Returns and Accounting
As an influencer, you’ll need to file a Self-Assessment tax return every year. However, once you hire a team, your financial management becomes more complex, and you may need to consider hiring an accountant to help you.
An accountant can assist with:
- Filing your Self-Assessment.
- Managing PAYE and NICs.
- Ensuring VAT is accounted for.
- Filing year-end accounts if you operate as a limited company.
As part of your financial responsibilities of hiring team as influencer, you need to ensure that all taxes, including corporation tax (if applicable), are paid on time and that your financial records are accurate.
7. Insurance and Liability
When you hire a team, you also take on new insurance responsibilities. You’ll need to ensure that you have employer’s liability insurance, which is legally required in the UK if you have employees.
This insurance protects you in case an employee is injured or becomes ill as a result of their work. The cost of this insurance can be included as a business expense, but it’s another part of the financial responsibilities of hiring team as influencer.
Additionally, you may want to consider public liability insurance and professional indemnity insurance to protect yourself and your team in case of any legal disputes or claims made by clients.
Conclusion
Hiring a team as an influencer can help you grow your business and focus on creating valuable content. However, with this comes various financial responsibilities of hiring team as influencer. From correctly classifying employees to managing payroll, pension contributions, and VAT, the financial landscape becomes more complex. Ensuring compliance with HMRC regulations and keeping your finances in order is crucial for long-term success.
Being aware of your financial duties not only helps you avoid penalties and legal issues but also enables you to operate more efficiently and professionally. Remember, the financial responsibilities you take on are an investment in your business’s growth and sustainability.
Disclaimer:
This article is for informational purposes only and does not constitute financial or legal advice. For specific advice related to your circumstances, please consult with a financial professional or tax advisor. Always ensure compliance with HMRC guidelines when managing your financial responsibilities as an influencer.