As the landscape of digital marketing evolves, influencers are becoming significant players in the industry. Whether they are promoting products, creating engaging content, or sharing their experiences, influencers are essentially running a business. Like any other business, they incur various expenses in the process. To maximise their earnings and reduce tax liability, influencers need to understand what business expenses they can deduct. This blog will explore the specific expenses that influencers can claim to reduce their taxable income, ensuring compliance with HMRC regulations.
What Business Expenses Can Influencers Deduct?
1. Understanding Allowable Business Expenses
Allowable business expenses are costs that are necessary for running a business. According to HMRC, these expenses must be “wholly and exclusively” for business purposes. If an influencer spends money on something that is directly related to their content creation or promotional activities, this expense can typically be deducted. However, mixed-use expenses, like a mobile phone or internet bills, must be apportioned correctly between business and personal use.
2. Equipment and Technology
One of the most significant expenses for influencers is equipment. Influencers often require high-quality cameras, microphones, lighting setups, computers, and editing software to create professional content. These items fall under the category of capital expenses. Influencers can deduct the cost of these items through capital allowances, which allow them to claim a portion of the cost over several years.
In addition to purchasing equipment, influencers can also deduct the cost of maintenance and repairs. If you rent equipment instead of buying, the rental costs are also deductible. Knowing what business expenses can influencers deduct in terms of equipment helps in accurate tax planning and compliance.
3. Home Office and Studio Costs
Many influencers operate their business from home. If you use a specific area of your home exclusively for business purposes, you can claim a proportion of household expenses. These expenses can include:
- Rent or mortgage interest
- Utilities (electricity, gas, water)
- Internet and phone bills
- Council tax
To determine how much you can deduct, you need to calculate the proportion of your home used for business. For example, if you use one room in a five-room house exclusively for work, you can potentially deduct 20% of the relevant household expenses. Understanding what business expenses can influencers deduct in relation to home office and studio costs can significantly reduce overall tax liabilities.
4. Travel and Subsistence Costs
Travel is often an essential part of an influencer’s business. Whether attending events, meeting clients, or creating content in different locations, travel expenses can add up. Influencers can deduct costs related to:
Train, bus, or plane tickets
Mileage allowance for using your vehicle (the HMRC-approved rate is 45p per mile for the first 10,000 miles and 25p per mile thereafter)
- Parking fees and tolls
- Hotel accommodation for overnight stays
- Meals and subsistence while away on business
However, remember that only travel undertaken for business purposes can be deducted. Any travel for personal reasons, even if combined with business, must be proportionately reduced. It is crucial to understand what business expenses influencers can deduct to ensure all eligible costs are included.
5. Marketing and Promotion Costs
Marketing is a crucial aspect of an influencer’s business model. Expenses that can be deducted in this category include:
- Advertising costs (including paid social media ads)
- Costs for running a website or blog (including domain registration, hosting fees, and website development costs)
- Promotional items like branded merchandise or giveaways
- Fees paid to third-party agencies or consultants for marketing services
By understanding what business expenses can influencers deduct in the marketing and promotion category, they can maximise their reach and minimise their tax burden.
6. Professional Fees and Subscriptions
Influencers may also incur professional fees, such as those paid to accountants, lawyers, or consultants. These expenses are generally deductible, provided they are directly related to the influencer’s business activities.
Membership fees and subscriptions to professional organisations or industry publications are also deductible. For example, if an influencer subscribes to a content creation platform or a digital marketing magazine, these costs are considered legitimate business expenses.
7. Content Creation and Development Costs
Creating engaging and original content often involves expenses that go beyond just equipment. Influencers may spend on:
- Graphic design software or applications
- Music and video licensing
- Props, costumes, or set design materials
- Fees paid to collaborators, such as photographers, videographers, or stylists
These expenses are considered direct costs associated with the business of influencing and are deductible. Keeping a detailed record of these expenses will help influencers claim the correct amount on their tax returns.
8. Gifts and Samples
Giving away free samples or gifts to followers, clients, or collaborators can be a key marketing strategy for influencers. However, HMRC has specific rules regarding the deduction of gifts and samples. The cost of providing samples or gifts is deductible only if:
- The total cost of the gifts to any one person does not exceed £50 in a tax year.
- The gift is not food, drink, or tobacco unless it is a promotional item.
- The gift has an advertisement for your business or is promotional in nature.
If these conditions are met, the expense can be deducted as part of marketing and promotional costs.
9. Clothing and Personal Appearance
In some cases, influencers may deduct expenses related to clothing and personal appearance, but this area can be a bit tricky. Generally, HMRC does not allow deductions for everyday clothing, even if it is worn exclusively for business purposes. However, specialised clothing, such as costumes, branded clothing, or items not suitable for everyday wear, may be deductible.
Expenses related to makeup, hair, or grooming may also be deductible if they are essential for a particular type of content or performance. It is crucial to document these expenses clearly to justify their business purpose.
10. Insurance and Financial Costs
To safeguard their business, influencers may purchase various types of insurance, such as public liability insurance, professional indemnity insurance, or contents insurance for equipment. The premiums paid for these policies are generally deductible as business expenses.
Additionally, bank charges, interest on business loans, and credit card fees related to business transactions can also be claimed as allowable expenses.
11. Training and Development
Continuous learning is essential in the fast-evolving world of digital marketing and content creation. Influencers can deduct costs associated with:
- Courses or workshops to improve skills
- Online training subscriptions
- Books, magazines, or resources related to content creation, social media marketing, or business management
By understanding what business expenses can influencers deduct for training and development, they can invest in their growth while managing their taxable income effectively.
12. Software and Online Tools
Many influencers rely on software and online tools to manage their business effectively. From scheduling tools like Hootsuite or Buffer to analytics platforms like Google Analytics or SEMrush, these tools come with subscription fees that are deductible as business expenses.
Similarly, costs related to maintaining an online presence, such as domain renewal, website hosting, or even subscriptions to premium photo editing software, can also be deducted.
13. Bank Fees and Interest
If an influencer has a dedicated business bank account, they may incur bank charges or fees for overdrafts, transfers, or currency conversions. These expenses can be claimed as allowable business expenses. Furthermore, interest on loans specifically taken out for business purposes, such as buying new equipment or investing in a marketing campaign, is also deductible.
14. Phone and Internet Costs
Phone and internet costs are essential expenses for influencers. However, since these services are often used for both personal and business purposes, only the portion used for business can be deducted. Influencers should maintain records showing how much of their usage is for business purposes to determine the deductible amount accurately.
15. Understanding VAT and Influencer Deductions
If an influencer’s business turnover exceeds the VAT threshold (£85,000 as of 2023), they need to register for VAT. Once registered, they can reclaim VAT on purchases related to their business activities. This includes many of the expenses discussed above, provided they have valid VAT receipts.
Conclusion
Understanding what business expenses can influencers deduct is crucial for maximising profitability and ensuring compliance with HMRC regulations. From equipment and travel costs to marketing expenses and professional fees, influencers have a wide range of deductions available to them. However, it’s essential to keep accurate records and separate business expenses from personal ones to ensure claims are valid and avoid any penalties.
Disclaimer
The blog provides general information on allowable business expenses for influencers in the UK and is not intended as legal or financial advice. Always consult with a qualified accountant or tax professional to understand your specific circumstances and ensure compliance with HMRC regulations.
