Online Income Is Taxable Income
The growth of the creator economy has brought a significant number of people into self-employment who may not have considered themselves business owners in a traditional sense. A YouTuber with advertising revenue, an Instagram influencer receiving brand payments, a Twitch streamer with subscription income, or a podcaster with sponsorship deals is running a business for tax purposes, regardless of whether the activity started as a hobby or whether they have formally registered as self-employed with HMRC.
HMRC has been clear that income from social media activities is taxable, and in recent years has written directly to content creators who have not registered for Self Assessment despite having visible commercial activity online. The trading allowance of 1,000 pounds per tax year provides a small buffer, but any creator whose gross income exceeds this figure in a tax year should be registered and filing a Self Assessment return.
Types of Creator Income and How They Are Taxed
Creator income typically falls into several categories, each of which must be reported on the Self Assessment return. Platform advertising revenue from YouTube AdSense, Twitch, Spotify, or similar platforms is trading income. Sponsored content fees paid by brands for posts, videos, or reviews are trading income. Affiliate commission earned when followers purchase through tracked links is trading income. Merchandise sales are trading income with associated cost of goods. Subscription income from Patreon or similar platforms is trading income. HMRC’s guidance on what counts as self-employed income, including digital and creator activities, is available on the self-employed records guidance page.
Gifted products received in exchange for promotion are treated as income at their market value. A creator who receives a 500 pound camera from a brand in exchange for a review has received taxable income of 500 pounds, not a free gift. HMRC has taken an increasingly firm line on gifted products in recent years, and creators who have not been reporting this income should review their position.
Allowable Expenses for Content Creators
The range of allowable expenses for a content creator is broader than many appreciate. Equipment including cameras, microphones, lighting, computers, and editing software used for content creation is allowable. A proportion of broadband and mobile costs that relates to the business is allowable. Studio or dedicated workspace costs, whether rented or a proportion of home costs, are allowable. Travel to events, brand meetings, or content shoots is allowable. Subscription services used in the creation process are allowable.
The challenge with creator expenses is the dual-use problem. A camera used both for personal photography and professional content creation is not fully allowable; only the business-use proportion can be claimed. Keeping a clear log of business versus personal use for equipment that serves both purposes is good practice and will substantiate a claim if HMRC enquires.
VAT for Content Creators
A content creator whose taxable income exceeds the VAT registration threshold of 90,000 pounds must register for VAT. Above this level, VAT must be charged on UK supplies, and the creator must file quarterly VAT returns. Many creators receive income from overseas platforms and overseas brands, and the place of supply rules determine whether UK VAT applies. Services provided to VAT-registered businesses in other countries are generally outside the scope of UK VAT, which means the revenue does not count toward the registration threshold and no UK VAT needs to be charged.
For content creators whose income is growing and whose bookkeeping has not kept pace with that growth, getting the records in order before the first Self Assessment deadline is the priority. Our bookkeeping services help self-employed creators set up a proper bookkeeping system and maintain it month by month.
If you are an influencer or creator who has been trading for more than one tax year without filing, the disclosure process through HMRC’s voluntary disclosure route is available. Our outsourced bookkeeping service can help reconstruct historical records as part of bringing your tax position up to date.
About the Author
Stuart Kerr is Managing Director of Bookkeeping Packages Ltd, an outsourced bookkeeping service supporting UK small businesses and accountancy practices. With over 20 years of bookkeeping experience, Stuart specialises in helping businesses maintain accurate records and management accounts. Stuart is a bookkeeper, not a regulated financial adviser. Nothing in this article constitutes tax or financial advice. Call 0161 531 0087 or visit bookkeepingpackages.co.uk.
The information in this article is provided for general guidance only. Stuart Kerr is a professional bookkeeper, not a regulated financial adviser. This content does not constitute tax or financial advice. For advice specific to your circumstances, please consult a qualified accountant or tax adviser.
By Stuart Kerr, Managing Director, Bookkeeping Packages Ltd