The occupation of ‘influencer’ is more popular than ever, but there isn’t much information out there on how to pay taxes if you become one, how much you’ll pay, or even if you need to.

The good news is if you do need to pay tax, it’s similar (on the most part) to how other self-employed individuals pay theirs, although it can get a bit more complicated if you receive ‘gifted’ products or free days out.

Whether you fell into influencing by chance, or you were influenced to be an influencer (that’s a lot of influencing) – this blog is for you.

Let’s dive into the tax influencers need to pay.

What is an influencer?

An influencer is someone who has the ‘influence’ and power to affect their audiences’ purchasing decisions. They have authority over their audience, usually homing in on a particular niche, for example food, fashion or beauty.

There are different levels of influencers depending on their reach and how many followers they have.

It goes in the order of:

1. Mega influencers
2. Macro influencers
3. Micro influencers
4. Nano-influencers

If you’re more of a ‘nano-influencer’ you may be wondering whether you’re influencing as a hobby, or you’re trading. Keep reading to find out whether you should be registering your earnings with HMRC.

How do I know if I’m influencing as a hobby or trading?

Truth be told, we can’t give you a definitive answer – as the lines are often blurred when it comes to what counts as trading, and what doesn’t. There are telltale signs you can go off though.

For example, if you receive a free meal out in return for some video content from time to time, or you receive £50 to promote a product, maybe once a month or a few times a year – chances are you’re not trading.

But if you are purposely building a strong media presence, with a strategy in place and regular clients who pay you to promote their services – you may likely be trading.

In many cases, influencers start the job off as a hobby before it turns into a business that’s trading. If you feel you’re stuck in between, it’s important to note you’ll need to let HMRC know if you:

• Make over your tax-free trading allowance
• Begin to get regular clients
• If influencing becomes a regular source of income for you

It’s important to note, just because you need to inform HMRC of your earnings, doesn’t always necessarily mean you’ll need to pay tax, or that you’re officially trading (it can still be just a hobby that makes you a little more than the trading allowance allows). Whether or not you pay tax, depends on your profits, and which tax bracket you fall into.
 

How do influencers generate income?

The world of influencing can be confusing, and you may have thought at first, can I really generate income from just views alone? The answer is yes, you can!

Here are ways to earn money as a social media influencer:

• You can earn money based off content views and followers (you will need to ensure you’re eligible though, for example if you film content for TikTok, ensure you’re on the TikTok creator fund)
• Affiliate links (this is where you’ll advertise a product and have a specific link to give your followers, that way if they buy the product, you receive commission)
• Businesses may pay you to film content via a ‘paid partnership’
• You may be gifted a product or experience

Should I register my influencer business with HMRC?

If you believe you’re trading, and you’ve earned over the tax-free trading allowance, you’ll need to let HMRC know.

Unfortunately, it’s not as easy as registering as an influencer – you’ll need to decide on a legal business structure. But once you’ve decided which business structure you’d prefer, it’s less confusing as there are rules on exactly what you need to submit, and the taxes you’ll need to pay (as well as the deadlines).

The most common business structures for influencers are sole trader businesses, and limited companies.

If you decide to trade as yourself, rather than as a company, you’ll be a sole trader – this means you’ll register for Self Assessment and pay income tax and National Insurance contributions. This can be great for influencers, because you essentially ‘are’ the business (in a legal sense), and you can keep all of your profits after tax.

As things get bigger, and you hire moderators and begin to get brand deals, it may be time to switch to a limited company. A limited company is a separate entity to yourself, which offers you more protection if your business gets into debt or has any legal trouble. It can also be more tax efficient, depending on how much you’re earning. In this instance you’ll submit Company Tax Returns and pay Corporation Tax.

Do I pay tax on gifted items?

When you have actual money in your bank account, it’s much easier to work out how much tax you need to pay. But gifted items are where it gets tricky. Any goods, or services you may receive for free to endorse are classed as a ‘Payments in Kind’ (PIK). Even if the product you’ve received is completely out the blue.

When it’s time to complete your Self Assessment, any Payments in Kind will need to be included in your figures when calculating your income. You’ll include the value of the product – which is usually the amount of cash you could sell it for.

You may also need to let HMRC know about any gifts you receive even if influencing is just a hobby –particularly if you are contacting brands to promote their products as that would be classed as having a marketing strategy like a business!

Claiming expenses and keeping records as an influencer

As an influencer, you’ll almost definitely incur expenses. Whether that be your phone or internet bill, lighting and cameras for your videos – or non-gifted products you’ve reviewed to create content. It’s important to ensure you deduct these expenses from your profit – so you pay less in tax!

If your expenses end up being more than your income – you have made a ‘loss’.

 
In order to claim all of your expenses, as well as record any Payments in Kind – you’ll need to keep records. Good bookkeeping software can help you record your daily transactions, and help you effectively manage your cash flow.

 
Call 020 3355 4047 to talk to one of the team about our online accounting and bookkeeping services, or get an instant online quote.