Are you working as a creator? Perhaps as an artist, musician, writer, game designer, or even a podcaster? If so, it’s perfectly understandable if the last thing you want to think about is tax. Unfortunately, tax is unavoidable, but a little planning could save you considerable stress and money later. We’ll go over the ins and outs of paying tax on the earnings you make as a Patreon creator.

Using Patreon to sell your creative work from the UK

Creators can use the Patreon platform to earn money directly from their audience by providing content to subscribers. It gives the creator a much more predictable revenue stream, and offers the chance to sell a more personalised experience such as:

• Access or insight: This could mean access or insight into content your audience wouldn’t normally get to see, such as behind the scenes footage of a studio recording
• Engagement: Direct contact with your customers, recording live streams, or perhaps hosting online events
• Fan recognition: Add their names to your products. Personal recognition of their following can be very attractive to some fans.
• Digital and physical products: This feature allows you to distribute products directly to your supporters

How much should I charge for my work on Patreon?

One of the most common questions from anyone selling their own products or services is about what to charge. Know your worth! Research what other sellers charge, and factor in the effort you put into production.

It’s also worth knowing that, like pretty much all ecommerce platforms, you’ll be charged for hosting and handling fees. Patreon earns fees from you in two ways:

• Firstly, it charges everyone for payment processing, currency conversions, and payout fees. These vary depending on the size of the transaction
• Secondly, Patreon also charge a monthly fee as a percentage of your earnings (so you won’t pay anything unless you start earning). Full details can be found on the company website.

What is a W-8BEN form, and why do I need one on Patreon?

If you sign up for Patreon in particular, you’ll be confronted with a scary sounding W-8BEN form during the initial process. You have to complete this to be able to trade from the platform.

It’s not as scary as it sounds, and you’ll be asked to do this because Patreon is an American company registered for tax in the United States.

Under US rules you would ordinarily withhold a proportion of the payments made by any of your US customers so you can pay tax to the US tax authorities. You won’t need to do this if you’re in the UK because the UK and US have a tax treaty in place.

Just fill out the W-8BEN form instead, and you’ll only need to worry about your UK tax payments.

Do I need to pay tax on my Patreon earnings?

Yes, you might need to, but this depends on how much you earn. Thanks to the trading allowance you can earn a total of £1,000 from self-employed or ‘miscellaneous’ activities (such as a self-employed hobby business) each tax year, without needing to tell HMRC or pay tax on it.

 
You’ll need to add together all the money you make on sales to work out how much you’ve earned. As long as it’s less than £1,000 in a tax year then you won’t need to register, even if you’re also earning wages from an employer.

How do I pay tax on my Patreon earnings?

Patreon won’t help you when it comes to sorting out your tax, so unfortunately this is something you’ll need to sort out for yourself. Your step-by-step guide to paying UK tax on your Patreon income will involve:

• Registering as self-employed
• Keeping records of all your income and expenses
• Sending regular tax returns to tell HMRC about your earnings

Is there anything I can do to reduce how much tax I need to pay on Patreon income?

Yes there are several ways you can manage your Patreon tax bill, such as claiming allowable expenses on your tax return, or offsetting the trading allowance against your income.

There are all sorts of expenses you might be able to claim, such as the cost of materials, a portion of your utility bills which relate to the business, shipping costs, and even the fees you pay to Patreon.

Choosing between claiming your expenses or using the trading allowance

Even if you need to register for tax, you can still use the trading allowance in your tax return. For example, if you made £5,000 of sales, you could then claim the £1,000 allowance, reducing your taxable profit to £4,000. Tax is paid on profit, so reducing your profits with the trading allowance means you’ll pay less tax.

While this is nice and simple, it might not be in your best interests to do this.

Taking our example above, imagine that you still make the £5,000 worth of sales. You also have £1,500 of expenses which you can claim tax relief on, and offset against your earnings.

In that case, you might decide to claim your £1,500 of expenses rather than claiming the £1,000 trading allowance, because that way you can claim more tax relief, and therefore pay less tax. We show a very basic calculation in the table below (although obviously your final tax bill would depend on lots of other things).
 

 
If you’re a creative and want help with any aspect of tax, feel free to give us a call and talk to one of the team on 020 3355 4047, or get an instant online quote.