Last year, almost 30,000 people earned revenue from their content and influence online, according to HMRC. Within the next 18 months, that figure is expected to treble.
Successful collaborations between brands and influencers tend to strike a balance between organic and ‘paid-for’ content. They serve to entertain, increase awareness and, ultimately, generate sales and revenue. Influencer marketing is thriving, with more and more bloggers and social media creators turning their part-time pastime into a full-time, fully monetised profession. And, where there’s money to be earned, there are taxes to be paid.
‘Social Media Stars Mightn’t Be Declaring What They’ve Been Paid’Much has been made in recent years of the income recorded by influencers, and an investigation by the CMA is ongoing, looking into concerns that “social media stars may not be declaring when they’ve been paid, or rewarded, to endorse goods or services”.
Whilst it may be fairly straightforward to tax sponsored or paid-for content (whereby a fee’s been decided), the waters are slightly murkier when it comes to payments ‘in kind’. This is where products or experiences have been given to a creator in return for contracted deliverables.
For both brands and influencers alike, it’s crucial to know exactly what you’ve earned (and how you’ve earned it). This is in order to work out exactly what you owe. So, how’s best to handle the complexities of influencer taxation? And what needs to be declared in order to maintain best-practice?
Subsidised Content & Payments In KindIn spite of recent regulatory changes, a lack of advertorial transparency is making it tricky to distinguish between paid partnerships and organic content. Monetary agreements, where money is offered in return for content, are fairly simple to understand in regards to taxation, and such arrangements must be filed appropriately with HMRC. Whether or not you’ll end up being taxed depends on the total revenue generated in that specific tax year.
You’re legally obliged to declare the financial value of any items you receive as a payment in kind, in your annual tax return. To verify the cost of the item or service, you should refer to your agreement from which it was provided. Be aware of this before you sign, and make sure you obtain a hard copy of the agreement. You never know when might need it in the future. In this instance, One Roof Social recommends either the wholesale or real-product cost, as opposed to the retail value (RRP).
If, however, an influencer is sent an item unexpectedly, it doesn’t have to be declared as income. This is because no agreement has been made to produce or deliver any content in return.
Expenses & HMRC RegistrationBoth full-time and part-time influencers need to register as self-employed with HMRC, and are entitled to a tax-free Personal Allowance of £11,850. Click here for a full list of tax codes.
As a self-employed, online influencer, you can also claim certain expenses for your daily work. This helps to reduce your taxable income, leaving you with a lower annual tax bill. Expenses can be claimed against things like equipment (phones, laptops, cameras, etc.), travel, phone & broadband bills, website expenditures, marketing costs, related courses, and even the amenities you use if you work from home.
And a caution too to those brands who are reluctant to pay influencers a cash sum. If you ‘gift’ an influencer a car or a holiday, for instance, in return for particular deliverables, HMRC requires they be declared as income earned. The only issue, of course, is that they haven’t actually got the physical funds to service the tax they owe. Ipso facto, this tactic might not prove quite as productive in years to come.