Thousands of social media influencers who have a side hustle on platforms such as TikTok are being targeted by HMRC to ensure they are paying the tax they need to.
The tax office is also looking at gamers and online traders such as those on Etsy, eBay, and Facebook Marketplace, amid fears that some don't realise they should be paying tax on the earnings they make online.
Content creation and marketplace trading have boomed in recent years, according to Adobe's 'Future of Creativity' study, which found the number of UK content creators doubled to 16m between 2020 and 2022. But Jessica Narweh, a 25-year-old business coach and influencer who previously trained as a tax adviser told The Times that many are not necessarily avoiding paying their tax deliberately, but because they "literally don't know how they should be paying it".
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A spokesperson from HMRC confirmed it was expecting to send around 2,300 letters to online content creators over an eight-week period and about 2,000 letters to online marketplace traders over a nine-week period but said the letters were routine and were aimed to educate, remind or prompt customers to review their tax affairs.
The spokesperson said the letters give customers an opportunity to report any undeclared income to HMRC. “This is routine activity," they said. "We believe our customers want to pay the right amount of tax, so we are taking steps to help people do so."
Experts at tax and accountancy software company Crunch has come up with a checklist of tax implications involved in being a social media influencer:
Keep track of income and expenses each tax year
Income includes cash, bank receipts, cheques, or the cash equivalent of gits and other items received as payment for content creation. And expenses includes all costs incurred to create the content. There are free and paid options for tax and accountancy software out there, which can help you keep track of both.
The same rules apply even if all of your content is created in exchange for gifts, not money
Michael Awuye of Crunch said: "Calling things 'gifts' creates the impression you don’t have to declare or do anything about it. This notion is wrong. If you have provided a service and instead of being given cash or extra digits in your bank account, you are given something else which is not cash, that thing you have been given is taxable. The amount of the income to be recognised is based on what the value of the item will be in cash. So, if you were given shares, a car, crypto, etc, there will need to be an assessment of the item in cash value at the time it was given for it to be declared as income."
There are no special tax rules and laws for content creation or being an influencer
However, there are rules on whether one is considered to be trading or not and therefore if you will be subject to paying taxes. HMRC states: “Broadly, ‘trade’ can be taken to refer to operations of a commercial kind by which the trader provides to customers for reward some kind of goods or services.” In simple terms, if you are into content creation with a view to making money or a profit, then you are trading, and any earning is taxable.
If your earnings are more than £1,000 in a tax year, you need to declare them to HMRC
You can register for self assessment here and declare your earnings.
Mr Awuye said: "HMRC seems to have woken up to the evolving trend of revenue generation from platforms such as Instagram, TikTok, YouTube, and Twitch, among others. If you are a content creator, there is no place to hide as these platforms can (if not already compelled) share data with authorities such as HMRC. So, it is best to get your act together before HMRC comes knocking."
The HMRC spokesperson said: “Each year we send out thousands of reminder letters on various areas of tax.”
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