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How to navigate tax obligations for influencers

How to navigate your tax obligations as an influencer
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    Influencers have become an integral part of the digital world thanks to their ability to engage with audiences on social media.

    While many influencers may see their work as a passion project or a fun way to make money, it is important to understand the tax obligations that come with this income. At WIS Accountancy, our accountants work with influencers to help them with all their accounting needs.

    What taxes do influencers have to pay?

    In this article, we will explore the tax requirements for influencers, including income tax, VAT and National Insurance contributions.

    Income tax for influencers

    One of the most important taxes for influencers to understand is income tax. Income tax is a tax on the income that an individual earns from their work, which includes earnings from influencer marketing. The amount of income tax that an influencer must pay will depend on their total income and any expenses that they can deduct from their taxable income.

    The UK tax system operates on a self-assessment basis for influencers, which means that it is up to the influencer to declare their income and pay the appropriate tax. If an influencer earns more than the personal allowance for the tax year, they will be required to file a tax return with HM Revenue & Customs (HMRC) and pay any tax owed by the deadline.

    In addition, influencers need to keep accurate records of their income and expenses, as these will be required when filing their tax return. This includes any payments received from brands or agencies, as well as any costs associated with their work, such as equipment, travel and advertising.

    VAT for influencers

    In addition to income tax, influencers may also be required to register for Value Added Tax (VAT) if their annual turnover exceeds the VAT threshold. VAT is a tax on the value that a business adds to its products or services, and it is charged on top of the selling price.

    If an influencer is registered for VAT, they will need to charge VAT on their services and pay this to HMRC. They will also be able to reclaim any VAT that they have paid on business expenses.

    However, not all influencer income is subject to VAT. For example, if an influencer is paid for their time and effort, this may not be considered a taxable supply for VAT purposes. However, if the payment includes any other goods or services, such as branded merchandise or sponsored posts, this may be subject to VAT.

    National Insurance for Influencers

    In addition to income tax and VAT, influencers may also be required to pay National Insurance contributions. National Insurance contributions are payments made by employees, self-employed individuals and employers, which help to fund state benefits such as the State Pension and the National Health Service.

    If an influencer is self-employed, they will be required to pay Class 2 National Insurance contributions if their profits are above the small profits threshold. They may also be required to pay Class 4 National Insurance contributions if their profits are above a certain level.

    It is important for influencers to understand their National Insurance obligations, as failing to pay National Insurance contributions can result in penalties and may affect their entitlement to state benefits.

    Make sure you understand your tax obligations

    It’s important that influencers understand their tax obligations in order to avoid penalties and ensure that they are paying the correct amount of tax. This includes understanding income tax, VAT and National Insurance contributions.

    Influencers should keep accurate records of their income and expenses and should seek advice from a qualified accountant or tax professional if they are unsure about their tax obligations. They should also ensure that they register for VAT and pay National Insurance contributions if required.

    By understanding and fulfilling their tax obligations, influencers can ensure that they are operating within the law and can focus on creating great content and engaging with their audiences. Get in touch with our specialist accountants for influencers today or call us on 0203 011 1898.

    Frequently asked questions about influencer taxes

    If you have any questions or would like some help with your tax obligations as an influencer, check out our FAQs below or contact WIS Accountancy today.

    What are the tax deductions that influencers can use?

    Influencers have the ability to claim expenses which can be deducted from their tax bill if the expenses are a part of their work.

    Some examples of these tax deductions include:

    • Tools for work, such as camera equipment, lighting, microphones or insurance.
    • Non-gifted products that have been purchased for review purposes. Online training courses, seminars or programmes.
    • Travel expenses, such as mileage when driving or plane tickets.
    • Software for business purposes, such as accounting software or image editing tools.
    • Subscriptions for things like stock photography databases.
    • Marketing services such as websites or advertising space.
    • Office costs such as office furniture or office rental fees.
    • Accounting costs such as accountancy fees.

    This list isn’t exhaustive, as influencers can claim expenses for any legitimate charges that are solely for business purposes.

    How should influencers be paid?

    Working as an influencer often means that you’ll be paid in a few different ways. One of the most common methods is through sponsored content, where a business will pay you to review or promote products or services. Other methods include forming partnerships with brands where you receive commissions based on additional sales made through your promotion.

    How does HMRC know about undeclared income?

    HMRC can glean insights about income through a number of different sources. They look at all of your tax returns, which incorporate income tax, VAT, corporation tax and PAYE.

    They’ll also be able to inspect financial statements and records held by banks and building societies, online payment providers like PayPal, debit and credit cards, credit references, cryptocurrency platforms and insurance providers. Together, these sources create a comprehensive picture of your income.

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