New research finds the average Brit earning money through social media makes £1,223 a year, above HMRC’s £1,000 trading allowance. But only 44% of those making extra income online say they’ve registered for self-assessment with HMRC and complete a tax return.
Over half (52%) of social media earners don’t realise they might need to pay tax on additional income or gifted items, and failing to abide by the tax rule could cost TikTok, Instagram and YouTube users in HMRC fines.
These figures are most concerning for social media users aged 18 to 24-years-old, as just 36% of them have filed a self-assessment with HMRC, despite more than half (55%) making financial gain from their social media activity - the highest of any age group surveyed.
Heather Cobb, UK Managing Director at Tide accounting software, warns social media users that they could be at risk of penalties if they’re not aware of the rules: “It’s great that TikTok, Instagram and other social platforms have opened up new ways for people to add to their income, and what might start as a bit of extra pocket money can quickly spiral into a serious side hustle.
Recommended reading:
- Review: Lakeland heated blankets and throws from 2p an hour
- Tried and tested: The dehumidifier that beat mould, damp and cut my bills
- The money-making app that cleaned my house
“Most people won’t treat this as a legitimate business venture at first, so it can be easy to lose track of exactly how much has been made over the course of a year. Especially for those who receive gifted items in return for social media promotion, as the value of these items also counts towards the yearly £1,000 allowance. Unknowingly going over this can result in a costly penalty.
“This can range from a ‘failure to notify’ penalty to late return and payment penalties. As these penalties are often based on a percentage of the tax owed, they can amount to substantial sums for millions of creators to cover.
“Our advice is to keep track of what you earn from the very first payment, and Tide makes it easy to open a separate business account for each business you run. Tools such as Tide Accounting also make it easy to track earning and expenses. That way, you’ll be able to understand whether you’re over the allowance and need to tell HMRC, as well as monitor the growth of your new side hustle”.
The first step for many when making additional income is to open a separate bank account to enable easier management and visibility over their finances. Tide offers a free business current account that offers auto-categorisation, which can be used for itemising social media earnings and keeping your finances organised.
Megan Paul, Tide member, Content Creator and Founder of Gel by Megan in Warwickshire says: “What started out as me posting photos of my nails on Instagram as a creative outlet alongside my ‘day job’ in the civil service, quickly grew to thousands of followers, brand partnerships, sponsored posts and now my own training academy.
“I took the leap to being self-employed four years ago, and my social media earnings have definitely helped me on my way. Taxes and self-assessments may feel scary, but most areas have thriving small business communities that you can lean on for advice, while modern business management platforms take a lot of stress out of the admin and organisation of your finances.
“I would urge anyone making additional income from a passion project or content creation to not just view it as that little thing you do on the side, but to figure out whether it’s something you could take more seriously, and turn it into doing something you love full time”.
Share