UK TikTok Creators: Taxes on Income & Gifts Explained
How TikTok creators in the UK pay taxes (sponsored posts, gifts, Ad revenue)
TikTok’s popularity surge directly influenced the rising number of UK-based creators with increased content monetisation via multiple revenue sources, such as gifts, ad revenue, and sponsored posts.
This snowballing effect in the creators or influencer economy pushed most of them to seek professional clarity through a TikTok UK accountant on their tax responsibilities to the HMRC (Her Majesty’s Revenue and Customs). This dictates the need for an accurate understanding of the report and tax payment on TikTok earnings for creators to ensure legal compliance and stay away from potential repercussions.
Standard TikTok revenue streams
TikTok now provides creators with multiple avenues to generate income, each of which has varying tax implications to bear:
Sponsored posts and brand collaborations
Famous and even emerging brands often look to partner with relatable creators to promote and improve engagement for their products and services, for which they offer compensation in the form of gifts or monetary aspects. HMRC treats these payments as regular taxable earnings and even the non-monetary gifts are liable to be reported if received in exchange for promotional benefits.
Ad revenue
Ads are a common source to earn additional income. By displaying ads on their content, creators can earn commissions from ad-sharing programs or the TikTik Creator Fund. These incomes, considered as self-employment income are subject to National Insurance Contributions and income tax.
Gifts from followers
When creators engage in TikTok live streams, followers can send virtual gifts, which are convertible into monetary payments. These varying amounts are treated as taxable income by the HMRC.
Tax obligations for TikTok creators
Suppose you are a TikTok creator earning your income as an influencer in the UK. It means, as per HMRC, you are technically categorised as a self-employed individual, which makes you liable for specific tax obligations:
Income tax
For the tax year 2024/2025, the personal allowance threshold in the UK is at £12,570. Annual earnings exceeding this threshold are liable for taxation as follows:
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Introductory rate: 20% tax for income between £12,571 and £50,270.
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Higher rate: 40% tax on income between £50,271 and £125,140.
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Additional rate: 45% tax on income exceeding £125,140.
It is mandatory to report all your income streams, such as ad revenue, gifts, and sponsored posts, on your Self-Assessment tax return.
National Insurance Contributions (NICs)
Every self-employed individual in the UK is mandated to pay a margin of their profits to NICs.
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Class 2 NICs: If your profits cross the annual £12,570 threshold, you are to pay £3.45 per week to NICs.
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Class 4 NICs: For-profits between £12,570 and £50,270, it is set at 10.25%, and for profits over £50,270, it is 3.25%.
These mandatory contributions are vital for eligibility for specific states' benefits and pensions.
Value Added Tax (VAT)
If your taxable earnings exceed £85,000 annually, you are required to register for VAT. These earnings cover incomes from merchandise sales, sponsorships, and other services. VAT registration makes you liable to charge VAT on applicable sales, enabling you to reclaim VAT on other eligible business expenditures.
Allowable expenses
To lower taxable profits, TikTok creators in the UK can deduct specific business-related expenditures, including:
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Home office expenses: A considerate share of rent, utilities, and internet costs.
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Equipment costs: The purchase of necessary equipment for content creation, such as microphones, cameras, lighting, and other essential production tools.
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Software subscriptions: Expenses for the use of editing software and content management tools.
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Travel expenses: Costs incurred for location shoots, meetings, and attending events.
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Professional services: Fees for hiring TikTok UK accountants, consultants, or legal advisors.
Keeping and maintaining a detailed record of the receipts of all expenditures is necessary to substantiate claims during tax assessments.
Registration and filing deadlines
If you are registered with HMRC, you must comply with tax filing requirements on time.
- Self-assessment registration: If you have not registered yet, do so by October 5th, following the end of the tax year in which you started earning taxable income.
- Tax return submission: Filing physical tax returns are usually deadlined by the 31st of October, while online format must be filed by the 31st of January following the end of the tax year.
If you miss these deadlines, you may have to face legal penalties and interest charges.
Common pitfalls and how to prevent them
Filing tax can be complex for a regular person, as you may not possess the essential knowledge and understanding of it all. While you can indeed hire a TikTok UK accountant on your behalf, here are a few common challenges that you can easily avoid:
Seek professional assistance
Considering the degree of complexities with varying tax regulations, it is widely advised to consult with a tax professional or a TikTok UK accountant experienced in the digital content landscape for better benefit. They can offer customised advice, help optimise your tax standing, and even help ensure consistent adherence to legal compliance.
To wind up
The way in which the digital landscape is expanding and evolving, it has become evident that content creators and influencers need to stay updated on their tax responsibilities. For TikTok creators in the UK, as much as it is mandatory to register themselves with HMRC, they are also liable to be transparent about all their revenue streams.
By thoroughly understanding the applicable tax implications, they can ensure adequate compliance with HMRC protocols while optimising their turnover. UK-based TikTok creators should adopt best practices to stay compliant and fulfil their tax obligations, navigating this realm while also focusing on growth and effective content monetisation.
Disclaimer
The information provided in this article is for informational purposes only and does not constitute financial, tax, or legal advice. While we strive to ensure accuracy, tax laws and HMRC regulations are subject to change, and individual circumstances may vary.
TikTok creators and influencers should consult a qualified tax professional or accountant to understand their specific obligations and ensure compliance with HMRC requirements. Please refer to the official HMRC website for the latest tax rules and thresholds.
The author and publisher of this content are not responsible for any actions taken based on the information provided. Always seek professional guidance before making tax-related decisions.
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