Navigating an Influencer’s tax return

1 June, 2021

Influencer, the dream job?

The life of an influencer may seem glamorous from the outside, but from the inside, it still comes with all the financial paperwork and tax that most careers do. In fact, the finances of an influencer are often more complicated due to the grey area around gifting and paid promotion. That’s why we’re here to help.

Who is a paid influencer?

Firstly, let’s talk about who qualifies as an influencer.

If you regularly spend time producing posts or writing reviews with a commercial value, you are likely trading as an influencer. If you are gifted freebies in exchange for social media posts, you likely qualify as an influencer; whether those be small clothing items, up to all-inclusive holidays, they all count as payments.

For years this has been a grey area when it comes to paying taxes, but new government rules now mean that influencers have to be completely transparent with their followers and HMRC about what’s been gifted and what is paid ad. This rule allows HMRC to see which bloggers should be paying tax easily, and if they aren’t doing so, they will start an enquiry into their tax affairs. This is a position you don’t want to be in.

What do influencers pay tax on? 

The answer is easy: it depends on the value of the products they receive. When an influencer obtains a product to review and post about in exchange for raising that product’s profile, its value represents its income and should be subject to tax.

How to deal with gift

For many micro-influencers, confusion comes about when it comes to gifted posts instead of payment to promote a product. The trick here lies in your contract and agreement with the brand.

If you have been gifted the item with no expectation to post about the product or brand, then that is a gift that does not need to be taxed. But if the brand has gifted you in return for a series of mentions on your social media channels, that instantly becomes a form of payment and must be declared for tax.

How influencers have to pay tax

As soon as you start earning as an influencer, the first thing you need to do is to register with HMRC for Self-Assessment. You can then begin logging your expenses to offset your income, allowing you to save on tax.

So what can be offset?
As an influencer, you may be able to declare your expenses to deduct against your income, which lowers your tax position. This is only possible if you are paying your own expenses.

Examples of the expenses you may claim back may be:

  • Website or internet costs
  • Proportion of phone bills
  • Photography cost
  • Software costs
  • Computer/camera equipment
  • Travel costs
  • Working from home costs
  • Online boosts

When you reach the end of the financial year, you will have to submit your annual tax return to HMRC with details of both your income, the value of gifted goods, and your expenses.

Our advice
One piece of advice that I would give to any influencer when looking at their finances is to create a separate business bank account and link this to a bookkeeping software so that you can separately keep track of all income and expenditure.You can also set up a receipt app, enabling you to scan your receipts and automatically logs them for you by syncing with your software.

This will make your tax return at the end of the year easier as you will have clear records of your financial incomings and outgoings all in one place.

How Auria can help
As specialists within the entertainment sector, we fully understand the complexities of the industry’s financial structures and accounting. Auria will help and guide you through all of the relevant Business & Tax issues you may face as an influencer.Not only can we help you sort through your finances and prepare for the tax season, but we can also provide a full business advisory service to help you every step of the way, freeing up your time to focus on creating your content.

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