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Tax when you’re newly self-employed can be daunting, especially if you work in a relatively new industry such as content creation and influencing. This is largely down to the fact influencers don’t always receive cash in their bank for the work they do. Instead, it could be a free PR gift to review, or a complimentary service to vlog about (such as a meal at a restaurant, spa treatment, or even a holiday abroad).

Unfortunately, some of those gifts won’t be tax-free, and you’re legally required to declare any taxable gifts you receive. So let’s go over it all in more detail.

Do influencers pay tax?

You can earn up to £1,000 of miscellaneous income every tax year, without needing to tell HMRC or pay tax on it. Known as the Trading Allowance, the term ‘miscellaneous income’ includes earnings from casual self-employment.

If you go over the £1,000 threshold then you might need to submit a tax return to tell HMRC about what you earn as an influencer but this doesn’t necessarily mean you’ll need to pay tax on those earnings.

It all depends on how much profit you make. If your total earnings for the year are within the personal allowance (this is the amount of tax-free income you can have in one year), you won’t pay tax, but anything over this will be taxed based on which tax band it falls into.

But don’t panic if your income is in the higher rate band! You’ll only pay the higher rate of tax on the earnings which fall within that tax bracket, and not on all of your income!

It’s super important to ensure you claim any expenses, so you don’t end up paying more tax than you need to.

Do I need to pay tax on PR gifts?

Sometimes. Basically, HMRC are interested in any PR gift you receive that leads to personal gain or offers commercial benefit. There are instances where a PR gift is unlikely to be subjected to tax.

For example, if a brand gifts you something freely, without any obligation to promote it then this might have an impact, but other factors come into play too, such as value.

Some PR gifts will be subject to tax if their value reaches a specific threshold, while others may be tax-free – it’s always best checking with an accountant if you’re unsure before ruling anything out! The rules are pretty complicated. Any gifts you receive that are considered a form of payment are known as payments in kind.
 

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What are payments in kind?

Payments in kind are a gift or free service given as form of payment instead of actual cash or money in the bank.

Receiving the gift as a ‘payment’ is the key point – if it’s just a gift from a friend or family member, which isn’t in return for anything, and doesn’t benefit or promote something, it’s completely tax-free!

Let’s say you’re a social media influencer in the beauty industry. You receive PR gifts from multiple brands but some won’t need to be declared. For instance, random packages that contain small products with a value of under £50 that you don’t promote or post about. Others must be declared to HMRC.

For example

A brand reaches out to you about promoting their premium skin care range that retails at £120. You’ll receive the products for free as long as you create and publish a short Tik Tok video, along with a link to the product for your audience to purchase.

HMRC will likely class this as a Payment in Kind (PIK) – which is a use of goods (or a service, such as tickets somewhere or an invitation to eat out for free) instead of a cash payment.

As a social media influencer, you’re likely to post about all kinds of things – even experiences and products that haven’t been gifted. It’s important to always put a disclaimer on any gifted products and tell your audience whether your content is or isn’t promotional.

It’s beneficial for your personal brand to keep things authentic with your audience, and also provides proof to HMRC that you were not gifted or paid. Especially if you do go on to work with that brand in the future, and it looks like previous posts weren’t declared honestly as gifts or ads.

Any non-gifted products you review online (that you’ve purchased purely for content purposes) can be claimed back as a business expense! Efficient bookkeeping can help you keep track of this.

Do I have to declare all my PR gifts to HMRC?

HMRC don’t need to know about all of your PR gifts, only the ones that are subject to taxes. It’s always best to check with an accountant first, but HMRC will mainly go off three key details, which we explain below.

Cash value

If you receive a tangible PR gift (this would be something like a product or service), and it’s worth more than £50, it’ll be subject to tax. If it’s under £50, you likely won’t need to pay any tax on it – but it’s still important to check. Tax is complicated!

Type of gift

Can you exchange the gift for a cash sum? For example, a spa day or tickets to a football match. If the answer is yes, it’s likely taxable. There are exceptions though, such as non-transferable tickets to an event.

Purpose

This is the easiest way to identify whether your PR gift is subject to tax. What are the intentions behind the gift? For instance, if you are gifted a PR item worth over £50, with the intention to endorse the product on social media it’s then classed as a non-monetary payment which is subject to tax.

Like anything though, there are exemptions. If you’re gifted something personally instead of for commercial purposes (for example, a brand sends you a gift for your birthday with no expectations for you to promote it), it’ll be tax-free – just remember to keep proof!

Who determines whether a PR gift is taxable?

It’s your responsibility to determine whether a PR gift is taxable – if you’re ever unsure, speak with your accountant.

It’s worth considering PR gifts and whether or not you’d like to accept them. One reason is for your brand (you don’t want to start promoting something completely random your audience aren’t interested in), and another is for tax purposes. If it’s a large gift, are you prepared to pay tax on it?

Are there any penalties if I don’t declare some of my PR gifts?

If HMRC inspect your income and find you haven’t declared all of your taxable PR gifts – then you could face penalties. How much depends on whether HMRC believe it was a mistake or not.

If they believe it was a mistake, the penalty will be between 0 and 30% of the tax amount, but if they believe it was concealed, you could face a penalty of up to 100% – on top of the tax which you owe.

How do I pay tax on my PR gifts?

Any PR gifts classed as a ‘Payment in Kind’ will need to be declared on your Self Assessment tax return.

 
Do you need help figuring out if your PR gifts are payments in kind? Call us on 020 3355 4047 or get an instant quote online.

About The Author

Rachael Anderson

A creative content writer specialising across business, finance and software topics. I have a love for all things writing, and creating engaging, easy to understand content that helps everyday people! Learn more about Rachael.

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