In the world of social media, being an influencer can seem glamorous, but it comes with its own set of responsibilities, including tax obligations. If you’re an influencer in the UK, understanding how to navigate tax relief options as an influencer is essential. Taxes may feel overwhelming, especially when you’re juggling content creation, brand collaborations, and follower engagement. However, with the right approach, you can manage your tax obligations and make the most of the reliefs and deductions available to you.
In this guide, we will break down how influencers can navigate tax relief options as an influencer, ensuring that you not only remain compliant with HMRC but also save money wherever possible. Let’s take a deep dive into the different types of tax relief, allowable expenses, and the best practices to simplify the entire process.
How to Navigate Tax Relief Options as an Influencer
1. Understanding Your Tax Obligations as an Influencer
Before we explore how to navigate tax relief options as an influencer, it’s crucial to grasp the basics of tax obligations. As an influencer, you are considered self-employed, meaning you’re responsible for declaring your income and expenses to HMRC. Whether you are making money from sponsored content, affiliate marketing, product sales, or brand deals, this income is taxable.
· Self-Assessment Tax Returns
All self-employed individuals, including influencers, need to complete a Self-Assessment tax return. This form details your income, allowable expenses, and any tax reliefs or deductions you are eligible for. HMRC will calculate the amount of tax you owe based on your net income (after allowable expenses and tax reliefs are deducted).
Filing deadlines are strict—31st January for online returns and 31st October for paper submissions. Missing these deadlines can lead to penalties. Understanding these basics is the first step in learning how to navigate tax relief options as an influencer effectively.
2. Key Tax Relief Options Available to Influencers
When considering how to navigate tax relief options as an influencer, one of the most beneficial aspects is claiming tax relief through allowable expenses. These are business-related costs that can be deducted from your taxable income, reducing the amount of tax you need to pay.
· Allowable Expenses for Influencers
Allowable expenses are necessary costs you incur to run your influencer business. Here’s a look at the common expenses that influencers can claim:
Home Office Costs: If you work from home, you can claim a portion of your household expenses. This can include rent, electricity, heating, and even Wi-Fi bills. HMRC allows you to either use a flat rate or calculate the actual costs based on the proportion of your home used for business.
Equipment and Technology: Cameras, laptops, lighting, editing software, and even mobile phones that you use exclusively for work can be claimed as expenses. Make sure to keep receipts and maintain a clear distinction between personal and business use.
Travel Expenses: Whether you’re traveling for a photoshoot, attending an event, or collaborating with a brand in another location, your travel expenses may be deductible. This includes public transport, fuel costs (if you drive), and even accommodation if you’re staying overnight for work purposes.
Marketing and Advertising: Any money spent on promoting your brand—whether through ads, influencer campaigns, or website development can be deducted as an allowable expense.
Professional Fees and Insurance: If you have legal, accountancy, or consultancy fees to pay, these can also be claimed as expenses. Similarly, any professional insurance, like public liability insurance, that protects your business can be deducted.
· Capital Allowances
If you purchase large or expensive items, such as a high-end camera or a vehicle for work purposes, you can claim capital allowances instead of deducting them as an expense. Capital allowances allow you to claim tax relief on the depreciation of the asset over time.
For example, if you bought a computer for £2,000, you could spread the claim over several years instead of claiming it all at once. Understanding capital allowances is key to effectively navigating tax relief options as an influencer.
3. National Insurance Contributions
As a self-employed individual, you are also required to pay National Insurance Contributions (NICs) on your earnings. NICs contribute towards your entitlement to state benefits, such as the State Pension and Maternity Allowance.
· Class 2 and Class 4 NICs
Influencers earning over £12,570 a year are liable to pay Class 2 NICs. Once your earnings exceed £50,270, you’ll also need to pay Class 4 NICs. Like income tax, these contributions are based on your profits after allowable expenses and tax reliefs are applied. Properly calculating and understanding NICs is crucial to ensure you’re paying the correct amount while still benefiting from potential deductions.
4. How to Claim Tax Relief as an Influencer
Now that you know what you can claim, the next step is understanding how to claim tax relief as part of the process of learning how to navigate tax relief options as an influencer.
· Keep Detailed Records
One of the most critical aspects of claiming tax relief is maintaining detailed and accurate records of your income and expenses. HMRC can request to see these records at any time, so it’s essential to have an organised system in place. This includes keeping receipts, invoices, bank statements, and any other relevant documentation that proves your income and business-related expenses.
· Use Accounting Software
Using accounting software like Xero, QuickBooks, or FreeAgent can simplify the process of tracking expenses and filing your Self-Assessment tax return. These tools can automatically categorise expenses, generate profit and loss statements, and integrate with HMRC’s online system, making it easier to claim your allowable expenses and capital allowances.
· File Your Self-Assessment Online
Filing your tax return online allows you to complete and submit your Self-Assessment more efficiently. It also offers immediate confirmation that your return has been received, reducing the risk of missing the deadline. When you file online, HMRC’s system calculates your tax liability for you, which helps ensure that you’re only paying what you owe after allowable expenses and tax reliefs have been deducted.
5. Additional Tips to Save Money on Your Tax Bill
Beyond understanding how to navigate tax relief options as an influencer, there are additional steps you can take to manage your tax bill more effectively.
· Use the Personal Allowance
Every individual in the UK is entitled to a tax-free Personal Allowance. For the 2023/24 tax year, this allowance is £12,570. Any earnings below this amount are not subject to income tax, so it’s important to make sure you’re fully utilising this benefit.
· Claim the Marriage Allowance
If you’re married or in a civil partnership and one partner earns below the Personal Allowance threshold, you may be eligible for the Marriage Allowance. This allows the lower-earning partner to transfer a portion of their unused allowance to the other, potentially reducing your overall tax bill.
· Register for VAT (If Applicable)
If your business earnings exceed the VAT threshold, which is currently £85,000, you must register for VAT. However, even if you earn below this threshold, it may still be beneficial to voluntarily register. Being VAT registered means you can reclaim VAT on business purchases, such as equipment and services, which could lead to significant savings.
· Consider Hiring an Accountant
Navigating the complexities of tax relief can be time-consuming and challenging, especially if you’re juggling content creation and brand partnerships. Hiring an accountant or tax professional can help you maximise the tax reliefs available to you and ensure that you’re fully compliant with HMRC regulations.
6. Key Deadlines to Remember
In addition to knowing how to navigate tax relief options as an influencer, it’s important to be aware of key tax deadlines to avoid late penalties and interest charges.
- 31st January: The deadline for submitting your online Self-Assessment tax return and paying any tax owed for the previous tax year.
- 31st July: The deadline for paying the second instalment of your tax bill if you’re using the HMRC payment on account system.
Missing these deadlines can result in penalties, so it’s essential to set reminders and ensure that you’ve completed all necessary paperwork ahead of time.
Conclusion
Learning how to navigate tax relief options as an influencer may seem daunting, but with the right knowledge and preparation, it’s entirely manageable. By understanding allowable expenses, capital allowances, and key tax reliefs, you can reduce your tax liability while ensuring you stay compliant with HMRC. Keeping detailed records, using accounting software, and seeking professional advice can further simplify the process and help you focus on what you do best—creating content and growing your influence.
Taking the time to fully understand your tax obligations will save you money in the long run, making your influencer journey smoother and more rewarding. Remember, navigating tax relief options as an influencer doesn’t have to be overwhelming—it’s about being informed and organised.
Disclaimer:
The article is for informational purposes only and should not be taken as tax advice. Always consult a qualified tax professional or accountant for advice tailored to your specific situation.