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In the UK, crowdfunding is a means of raising money for a business or project through small contributions. These contributions are made by a large number of people, often strangers. Examples of crowdfunding platforms include Unbound, Patreon and SeedInvest.
There are 4 common methods of crowdfunding currently circulating in the UK:
You would use this method if you’re a charity because it involves asking for donations to support a charitable cause, such as GoFundMe.
You can fund a project in exchange for non-financial benefits like gifts, samples, or tickets to an event. A common example of this that you may have heard of is Patreon, where a donation to a creator gets you access to additional podcast content or early access to tickets etc.
Through this approach, you would make a financial contribution to a project in exchange for shares or a stake in the new business. This is common for small businesses in distress, or like a small scale Dragon’s Den!
Similar to equity crowdfunding, this involves taking out many loans from multiple investors. It’s also called peer-to-peer lending (P2P)
Getting involved in crowdfunding could result in a lower tax bill. But it all depends on the project you’re funding. Here are the tax implications of each of the above forms of crowdfunding:
This all depends on your own needs and preferences. We have experts in Sage, Xero, QuickBooks, Free Agent and more. Speak to our accountants today to discuss your options and we can find the best solutions for you to keep track of your crowdfunding!
Of course! We advise that you start a comprehensive spreadsheet to keep track of your taxable income and relevant expenses throughout the year in order to make your tax return more straightforward. This can be done on an Excel spreadsheet or Google sheet to keep things simple! Contact our team for more advice today!