How social media influencers and content creators are taxed

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In today’s thriving social media landscape, it is estimated that globally, the influencer marketing industry is worth 21.1 billion US dollars as of 2023. In the UK alone, Glassdoor reports that the average salary for a social media influencer or content creator is over £33,000 per year with additional cash compensation worth up to almost £4,000. No matter the niche or sector, there’ll be an influencer that can sway consumer behaviour, so it’s certainly a lucrative business. Although often seen as glamourous, the earnings are no less subject to the mundane and ordinary everyday tax obligations. Where things can become murkier is when we go onto the subject of gifted or promotional products. This tax guide aims to help those in the content creation sector navigate the tax rules in order to be able to compliantly complete their tax return.

What is a social media influencer or content creator?

Before we get into the tax rules, let us first define what we mean by social media influencer and content creator so that you have a clear understanding of whether you fall into this group. There are many other terms used to describe an influencer or content creator, including YouTuber, vlogger, blogger, and even more broadly expert or celebrity. No matter the term you choose to use to describe this profession or activity, the one thing they all have in common is their ability to impact the decisions and opinions of their following through their digital content. Digital content can be any form of media across all the different available social media platforms out there. From a video on YouTube, to a photo posted on Instagram, a reel uploaded to TikTok, and even more traditional forms of digital content such as email newsletters, blog posts, and podcasts.

Is there such thing as influencer tax?

We should also begin by busting any myths of ‘influencer tax’. HMRC has no specific taxation that targets influencers or digital content creators, nor are they subject to their own dedicated tax rates. They are liable to pay the same types of taxes as any other profession with earnings including income tax, National Insurance contributions, VAT (if applicable) and corporation tax (if they work through a limited company).

You may still come across “influencer tax” which is a term that can be used colloquially to refer to the taxes that influencers owe on income earned from brand partnerships, sponsored content, affiliate marketing, or other forms of monetization.

So why is the nature of their work different when it comes to tax?

There are two factors which make calculating the tax liability of influencer earnings less clearcut than other incomes. Firstly, due to the nature of the work, it is not uncommon for content creators to receive gifts and free promotional products in exchange for endorsement. Sometimes, these are sent unsolicited, which can make it even more difficult to determine whether they should be considered as part of taxable income. However, on the other side of the argument, many of these gifts or items can be of significant value, ranging from high-spec tech, cars, and other luxury goods. Therefore, where these are offered either in lieu of cash payment or in addition to cash payment, it can mean a substantial sum that should be taken into consideration. HMRC sees this kind of exchange as “payments in kind” which is not dissimilar to benefits-in-kind (if the influencer were deemed to be a brand’s employee as opposed to self-employed). Payments-in-kind are taxable where they are received during the course of trading.

This brings us onto the second factor which makes influencer earnings slightly more complicated. How do you determine if a content creator is trading? The social media landscape is vast and dynamic. It can allow anyone to become an influencer, not only those with a large fan base or following that have formal brand ambassadorships, sponsorships, or other collaboration deals. In fact, many find “micro-influencers” (those with a small but highly engaged following) more persuasive to consumers because their recommendations often come across as more authentic than large influencers who have clearly been paid to post about a brand. So, if as a hobby, you recommend local coffee shops to your social media followers and you receive free coffees and pastries from them as a thank you, would this be taxable? We explore in more detail and help you determine in the section below.

What are payments-in-kind and how are they treated for tax?

To explain further, payments-in-kind are a type of payment arrangement made in exchange for goods or services that is not cash. Influencers may receive products to review or promote and in exchange for doing so, are allowed to keep the items without having to pay for them. If the person receiving these items is considered to be trading, then the value of these items needs to be accounted for as earnings. Importantly, the value of the item is what the person could sell it for (the market price), not necessarily the retail price. For clarity, you would use the market price of the item on the day you received the item as its value. This means the price could be inflated as well as deflated. For example, if an influencer receives the latest iPhone before it has been released to the general public it would be worth more than if they were to receive it after it had been launched.

In other instances, an influencer may be offered an experience instead of products, such as an all-expenses paid holiday including flights and accommodation. Where these experiences are non-transferable and cannot be sold for cash, these gifts are deemed to be tax-free.

How do you determine if an influencer is trading?

Once you have understood what may constitute as earnings and the value of gifted products, you next need to decide if it is taxable. As explained above, this is dependent on whether you have received these products during the course of trading. HMRC defines trading as any activity that is deemed to be “conducting general business, trading, or receiving income” which is not particularly clear or helpful when it comes to the job of influencing. However, we can use other HMRC guidelines for comparable professions such as authors who are also in the business of “creating content”. It states that where they “organise their life to regularly spend time on their writing to produce work which has a commercial value” and “combines this with a persistent and systematic marketing of the work for their own financial benefit” it will constitute as trading. From this, we can apply it to where a content creator organises their life to regularly spend time on creating content which has a commercial value and persistently markets their work for their own financial gain then this will be considered as trading.

However, it is important to bear in mind that even where you are not persistently and systematically marketing your work because you may only be casually creating content as a hobby, you may still need to declare any free promotional gifts you receive. Miscellaneous earnings often fall under the trading allowance, which means you can earn up to £1,000 per year without having to report this to HMRC. However, if you receive items which could be sold for over this value, then you will need to declare this through a self-assessment tax return. 

What taxes do influencers and content creators need to pay?

So, we’ve already provided clarity that there is no specific “influencer” tax, but now let’s move on to cover what taxes do need to be paid by influencers:

Income tax:

In the UK, anyone earning over £12,570 (the personal allowance) will need to pay income tax on the amount over this threshold. The personal allowance (which is available each tax year) can be extended by the trading allowance which we’ve explained in the section above. This means that you can earn up to a further £1,000 tax-free.

Once over this amount, your earnings will be subject to income tax at the three income tax bands:

• Basic rate tax at 20%. You fall into this bracket where your overall earnings are between £12,571 – £50,270.
• Higher rate tax at 40%. You fall into this bracket where your overall earnings are between £50,271 – £125,140. Furthermore, at the point where you earn £100,000 or more, you begin to lose £1 of your personal allowance for every £2 over this threshold.
• Additional rate tax at 45%. You fall into this bracket where your overall earnings are £125,141 or more. You will have no tax-free personal allowance at this bracket.

It is important to understand that the rates of tax are not applied to your entire income, but only to those within each bracket. For example, if you earn £80,000 per year, £37,700 will be subject to 20% income tax (the difference between £50,270 and £12,570), then £29,730 will be subject to 40% income tax (the difference between £80,000 and £50,270). Your total income tax bill will therefore be £19,292 for the year.

National Insurance:

National Insurance (NI) is a form of tax that is collected in order to pay for state benefits including the state pension. There are four different classes of NI which are dependent upon your employment status and earning levels. Class 1 NI is paid by employees and employers where the employee earns more than £242 a week from a single employer. Class 2 NI is being treated as paid (although no physical payment needs to be made) by self-employed workers where their profits are above £6,725 a year and under £12,570. Where someone who is self-employed earns over £12,570 a year, they must then pay Class 4 Ni, and if they earn under £6,725 then they may wish to make voluntary Class 2 NI contributions so that they remain eligible for the state pension. Finally, Class 3 NI are voluntary contributions made by those who are not working. Depending on the influencer’s employment status they are likely required to pay either Class 1 NI or Class 2 and Class 4 NI.

VAT (value added tax):

If a content creator has annual earnings of £90,000 or more, then they are legally required to become VAT registered (those earning under this threshold can still choose to become voluntarily VAT registered). Once VAT registered, you must begin to charge VAT on top of the fee you charge for your services. For example, if you charge £200 per sponsored post, you will need to send an invoice for £240 and pay £40 to HMRC. It will also mean that any expenses you pay for which are wholly and exclusively for your business and have VAT charged on them can be reclaimed by you as well. You will need to complete a quarterly VAT return as per the Making Tax Digital (MTD) regime.

Can influencers and content creators claim for expenses?

Now that we have covered the types of taxes influencers and content creators need to pay, we can move on to talk about how they can go about reducing those taxes. The biggest way to reduce your income tax liability is to reduce your profits. You can legitimately do this by accounting for and deducting your business expenses against your earnings. However, HMRC has strict rules on what counts as a tax-deductible business expense and defines these as expenses accrued “wholly and exclusively for the purpose of the trade, profession or vocation.” This is where things may get very particular for influencers or content creators. Common expenses that influencers will be able to claim for include:

• Camera or videography equipment including lighting and sound
• Computers, laptops, and software for content creation
• Business travel expenses to meet brands or go to locations for shoots
• Utility bills (or a portion of these where you work from home)
• Legal and accounting costs

However, some expenses may face extra scrutiny from HMRC and are deemed non-allowable expenses, such as:

• Goods and products that you buy in order to review but use personally as well. For example, if you buy several new outfits to show your followers how you would style clothing, and keep these to wear, then it is unlikely it will be considered a business expense but a personal expense instead.
• Events that you host to promote yourself to brands. If you decide to hold a lunch or dinner (or other hospitality event) to introduce yourself to brands in a bid to win more business, then this will not be an allowable business expense as it falls into the category of business entertainment.
• Fines or penalties received due to legal violations. These include parking fines, or fines from the Advertising Standards Authority where posts have not been accurately marked as sponsored content or as ads.

Where you are unsure whether you can deduct expenses, we would recommend working with an accountant who can provide the right UK tax advice.

Records that influencers should keep

Influencers must keep and maintain accurate and organised records of both income and expenses. Not only does doing this allow you to easily complete your self-assessment tax return to pay tax, but it will assist you greatly should HMRC decide to launch an investigation into your tax affairs. It is generally recommended that your records are kept for 5 years if you are self-employed or 6 years if you work through a limited company.

Get help with your influencer tax return

Calculating and submitting your self-assessment tax return can be tricky, from knowing how to work out the value of payments-in-kind, to knowing what expenses can be legitimately claimed against your earnings. Not only that, but often content creators can be so busy producing, that they may miss important registration deadlines as well as filing deadlines. By relying on trusted accountants, you can focus on what you do best which is engaging with your community and following, growing your social media accounts, and sharing the knowledge you’re passionate about. Get in touch today by using our online contact form to see how we can help with your personal tax return.