Quitting the regular 9 to 5 to pursue a career as an influencer has never been more popular. Influencers are a new type of entrepreneur that have collectively constructed a lucrative career from what was once a hobby.
While the market may be saturated, it shows no signs of slowing down with opportunities to create content that suits all interests, from the routine of daily life to travel and sport.
Recently, we considered how this new and evolving line of work falls in the eyes of HMRC and taxation policy in the UK. Whether it be a full-time career, or a side-hustle pursued alongside full-time work, social media influencing has tax and national insurance implications attached.
Last time we considered the protocol around gifts and PR packages, and where an influencer who talks about a product they received from a brand, without any prior agreement to post, falls in the eyes of HMRC. Ultimately, once a content creator, who in the eyes of HMRC is deemed to be carrying on a trade endorses a product or experience to their followers, it shifts from being a gift to a fully taxable item based on its value.
A self-made career that’s often operated from the influencer’s home, social media content creation brings expenses just like any other business or sole trader. In traditional business, expenses such as renting an office or studio space, premises running costs, accountancy fees and website fees are easily determined as being incurred ‘wholly and exclusively’ for the purpose of the trade. This is the standard HMRC requirement for an expense to be fully deductible.
It is when there is a duality of purpose, or when only a portion of the cost is attributable to the business, that difficulties arise. So, for example, when an influencer jets off on a brand trip to promote a holiday destination or experience, only the portion of the cost attributable to actual social media content creation may be expensed. Where the individual opts to extend the trip for leisure purposes, the cost of this element is fully theirs.
Another area creators need to take care of is the use of cameras, laptops, and phones for the generation of their content. Once these begin to also be used for personal reasons, they are no longer classed as a business expense.
In lieu of actual expenses incurred, influencers, as self-employed individuals, may avail of trading allowances of up to £1,000 each tax year, but this only applies when no actual expenses are claimed.
With all these factors in play, and as influencers continue to find fame in their own right that often leads to book deals, ambassador contracts and other work, creators are developing multiple streams of income.
In these cases, incorporating as a limited company can be advantageous if they wish to exercise more control over their profit extraction. A salary would be paid, but more often than not, a limited company carries a heavier admin burden in the form of increased reporting duties, such as preparation and filing of company accounts and legal obligations. Taxable trading profits would then be subject to corporation tax, and dividend rates will apply to funds extracted by directors and shareholders beyond payrolled salaries.
Ultimately, in a fairly unregulated industry that has transformed itself in the last decade, social media influencers must invest as much time and resource in knowing and understanding their taxation liabilities as they do in creating their content.
To discuss any aspect in more detail get in touch with Ciara Mallon Tel: 028 9032 3466 Email: ciaramallon@bakertillymm.co.uk