In todays ever increasing digital world more and more people are creating content either as a hobby or as part of a new profession, this can range from writing a blog, creating their own YouTube channel or by live streaming themselves on sites such as Twitch to name but a few.
Now the majority of people tend to begin creating content online as part of a hobby, however it can quickly become much more than that once you begin to earn income from them and you should be aware of the obligations that come with it.
The sad fact is – if you are earning any money at all from content that you’ve created you need to declare it all to avoid any unwanted penalties and charges from HMRC. Its best to be in the know, and in control from the start.
Hobby or a business?
This is the first thing you should be clear on. You should take a look at your blog, channel etc. from an independent point of view and assess how HMRC may view it from an income tax stand point.
If you are unsure and need more information check out HMRC website here .
You should also begin to think long-term and ask yourself if you expect or intend the blog, channel etc. to grow in terms of viewership and in turn increase the income you make from it, if you do then chances are its best to air on the side of caution and register with HMRC to get in front of things.
Just keep in mind – If you look like a business and act like a business, then you will need to register yourself with HMRC as a self-employed ‘sole trader’ .
What if it only makes a small amount of profit?
Unfortunately it doesn’t matter how little (or how large) of a profit your content/blog/channel makes you will still need to declare this income with HMRC. Although you do have a number of options;
If you are currently employed elsewhere with whom you already pay your tax with through PAYE you can contact HMRC directly and ask them to adjust your tax code, providing you only make a small profit from your content. Then any extra income you make will be taxed through your main employer.
More information on how tax codes work is available here .
Or you can decide to register yourself as self-employed with HMRC (check out our HMRC registration guide for further information) so that you can complete an annual self-assessment tax return where you can decalre the income earned via your content.
What if my digital content is my main source of income?
If the income you receive from you blog, YouTube/Twitch channel is you main source of income then you must register with HMRC as a sole trader. Ideally you should register within the first 3 months of starting the business up and the latest you can register is by the 5th October in the year following the end of the last tax year (which runs from April to April).
For example if you began the business (blog/channel) between 6th April 2017 and 5th April 2018 then you will need to have regsitered for self-assessment by the 5th October 2018 in order to avoid penalties and charges.
Once registered with HMRC as a self-employed sole trader you will be required to complete an annual self-assessment tax return; this can either be completed online or on paper via the post.
Filling out your tax return is a relatively straight forward process, providing you keep a record of ALL your earnings and expenses incurred throughout the tax year. It is good practice to keep any receipts given to act as proof for any expenses incured.
At the end of every tax year you will then need to gather all your records and receipts together in order to complete your annual accounts and file your tax return.
Allowable expenses to offset against your income
Whilst you do have to declare all income received from your blog/channel on your tax return you are allowed to offset this against any expenses or costs you incured as part of running or creating the content.
Alongisde the more common taxable expenses there are a few expenses and costs associated specifically with digital content creators which could be useful and these include:
- Web hosting fees and any domain registration costs for your blog or web site
- Any marketing or advertising costs incured
- Conferences or events attended in relation to the content/blog/channel (including travel expenses)
- A portion of your broadband and electricity costs.
- Assets and any office equipment required to operate and maintain your blog or channel such as laptops, pc’s, cameras, lighting, microphones etc.
These are not all inclusive and you should discuss these expenses with an expert, accountant, tax agent etc. as they are treated differently to regular expenses.
How much tax will I have to pay?
The current Standard Personal Tax Allowance is £11,850 (as of tax year 2018-19). This is the amount of money you are allowed to earn (from all your employments put together) without having to pay tax. If you earn less you shouldn’t have to pay a thing. If you earn more – you will have to pay 20% tax on whatever you earn OVER the £11,850.
Be aware you will also be required to pay Class 2 National Insurance Contributions of £153.40 per year (although you can apply for a Small Earnings Exemption certificate if your profits are less than £5965 a year) and is payable along with any tax due at the end of the tax year once your self-assessment has been submitted. You will also be liable to pay Class 4 National Insurance contributions of 9% on any profits between £8,424 and £46,350 per year.
Should you hire an accountant?
The decision as to wether you should hire an accountant or tax agent to deal with the tax side of things and provide tax help is a choice only you can make.
Before deciding to take the plunge and registering with an accountant you should make sure to do your due dilligance and seek advice (or reccomendations/reviews) to find the best accountant to help you.
If you would like any further information or advice from ourselves or would be interested in using our services by all means make sure to get in contact for a free, zero obligation consultation here.