Digital platforms such as social media have become another source of income for many online ‘influencers’, particularly since the pandemic. HMRC has begun a new campaign to remind influencers that there is no special tax regime for digital earnings and that they should declare earnings as self-employed individuals.
Any income that is generated from a trade, profession or vocation is considered taxable under the self-employment tax regime. Many online influencers initially treat their activities as a hobby, and fall into the tax trap by failing to realise that if their activities generate a steady stream of income, it will be considered a form of self-employment. Influencers can range from A-list celebrities, to those with a small but niche following. Many of them interact with followers, collaborate with established brands, and even sell their merchandise to generate income.
HMRC has begun issuing ‘nudge’ letters to remind individuals with potential digital earnings that they should ‘[pay] the right amount of tax at the right time’. It is in recognition that in many cases, influencers simply do not realise that self-employment rules also apply to them, rather than the deliberate evasion of tax. The same applies to gifts received by influencers, many of whom do not realise that they constitute another form of income.
By registering as self-employed, influencers may also be able to take advantage of certain tax benefits, such as claiming expenses for work-related expenditures, for example, marketing costs.
Influencers selling merchandise or digital materials should also be aware of the VAT registration threshold. Once turnover exceeds £85,000, there is an obligation to register for VAT to continue trading.