Do I need to pay tax on my online earnings?

13 June 2024

Reducing Tax

With over 5 billion people in the world now using some form of social media and the value of the global influencer market being roughly £16.6 billion GBP at the end of 2023, the attraction to become an online creator is greater than ever before.

Content creation and the use of social media as a business model for making money is a relatively new area in terms of tax.

HMRC don’t have a great deal of guidance on it, and it’s an area where tax rules are rapidly being updated and challenged.

This makes it all the more difficult for individuals to determine if they need to report anything to HMRC and pay tax on their online earnings, but that’s why we’re here to help!

When do I need to pay tax on my online income?

So, you’re an online content creator, whether your platform be YouTube, TikTok, Instagram, Facebook or one of the many online sites, when you amass a following these sites will monetise your content.

If you’re continuing to build your follower count and want to pursue a job as a full-time content creator, the likelihood is that HMRC will consider your ‘hobby’ a business, meaning that you will need to register as self-employed with HMRC and pay tax on the income.

However, if what you do is not an organised regular occurrence and you don’t have a plan to make money from your online presence, then it could be deemed as a hobby.

What if my hobby becomes self employment?

It is vital to review your tax position regularly.

You will still need to declare any profits made from a hobby to HMRC, however, it will be treated as miscellaneous income rather than self-employment income.

Note; you may not need to register and pay tax on income from content creation if the total income (turnover) does not exceed £1,000 during a tax year.

If you’re considering making social media your full-time role and your income is significant from it, there may be benefits in setting up a limited company instead of being a self employed individual.

You can read our recent article Thinking about incorporating your business for guidance around when this could be beneficial.

What counts as taxable income?

Income for online creators can be difficult to determine, as you’re not selling a service or goods directly to customers, there can be many different income sources.

We have outlined some sources below.

Income based on reach/followers. E.g. YouTube partner programme or TikTok creator fund.
Affiliate links.
Payment for creation of in-game items such as via the Roblox Developer exchange.
Payment from businesses for content creation. E.g. advertising.
Subscription based income. E.g. Patreon or fan pages.
Gifted products – receiving gifts in exchange for promoting them counts as taxable income and each product should be included in your Tax Return. The value treated as income is usually the amount of money you could sell it for. The rules around gifted products can be complex. Please get in contact if you are unsure.

What expenses can I claim?

You will probably incur expenses related to your content creation whether the income is a hobby or trade.

Some examples of allowable expenses for creators are below:

Subscriptions to content creation software – these can be apps or websites you’re paying for to create your content.
Any equipment used to create your content e.g. gaming equipment, in game purchases
Website costs.
Social media management tools. E.g. Hootsuite, Sprout Social or Buffer.
Advertising costs – such as facebook ads.
E.g. phones, computers, or a cameras and recording equipment.

The above is not an exhaustive list.

Any expenses that are directly related to the running of your business will be allowable expenses.

If your expenses are minimal but your turnover is in excess of £1,000 you may be eligible to offset the trade allowance against your income, however if you’re unsure then please contact us.

Is there any other Tax Relief available?

You may even be able to make use of other tax reliefs, such as creative averaging.

This can help to ‘average out’ earnings over consecutive years where there is significant fluctuation of earnings, reducing income paid at the higher rates of 40 or 45% in the more profitable year.

We can assist in advising if you meet the qualifying criteria to make a claim.

How do I record my income and expenses going forward?

There are many ways to keep record of your income and outgoings, however probably to simplest way and the way we would recommend is so use a cloud accounting software such as Xero or Quickbooks.

Cloud software links to your bank account and pull all transactions easily into one place.

Also, if you trade as a sole trader from April 2026, as part of Making Tax Digital you will be required to keep digital records and submit quarterly updates to HMRC.

What do I do if HMRC contact me?

If you have received a nudge letter from HMRC it is important to take action and respond, even if you believe you don’t have any income to declare and tax paid.

If you don’t respond HMRC may take enforcement action, please speak to us if you’re unsure why you’ve received a nudge letter.

If you would like to find out more, please get in touch by completing a contact form or calling us on 01634 731390.