UK tax on TikTok earnings is something most creators fail to account for. In recent years, we have seen an uplift in clients making a living on TikTok. Its clear that TikTok has evolved into a platform for content creators to monetise their creativity.
With its expanding user base, TikTok offers opportunities to turn content creation into a substantial income stream. However, this new earning potential brings financial and tax responsibility.
UK Tax on TikTok Earnings
Earning money comes with tax responsibilities. Just like any other job or business, the income you generate from TikTok isn't tax free. In the UK, HMRC are paying close attention to the digital economy, including crypto earnings and in particular, social media earnings.
Whether you're making some extra side income or have become a top content creator, it's essential to understand the tax rules:
Self-Employment Tax on TikTok Earnings
If you earn money from TikTok, you're considered self-employed. You must register with HMRC as self-employed and pay income tax and National Insurance contributions.
If you find that you're earnings are high, you may benfit from setting up a limited company struture and operating this way in order to be more tax efficient.
Value Added Tax (VAT) on TikTok Earnings
If your earnings exceed the VAT threshold, £90,000 currently, you'll need to register for VAT, charge it on your sales, and report and pay it to HMRC.
Income Tax and National Insurance Contributions on TikTok Earnings
Your TikTok earnings are subject to income tax, with the rate depending on your total income. Additionally, you'll need to make National Insurance contributions.
Tax Deductions and Allowances For TikTok Earnings
Deductible expenses related to your TikTok earnings can reduce your taxable income. It's crucial to understand which expenses are deductible.
Tax Deadlines and Payments
Be aware of tax deadlines, including when to file your tax return and make payments, to remain compliant and avoid penalties.
Financial Record-Keeping for TikTok Creators
Maintain records of all your TikTok earnings, invoices, expenses, and any contracts with brands or other parties. Keep receipts for all business-related purchases and expenses. We are partners with Xero and Dext. Both systems are perfect for you keeping on top of your TikTok earnings.
Expenses and Tax Deductions for TikTok Creators
Managing business expenses and deductions are important for reducing your taxable income and maximising your earnings from TikTok. Since no one wants to pay more tax than necessary, understanding allowable deductions is key.
Common Deductible Tik Tok Expenses for Content Creators
- Equipment Purchases: Cameras, lighting, microphones, and other production gear.
- Subscription Services: Software or platforms required for content creation or editing.
- Advertising and Marketing Costs: Expenses to promote your TikTok channel.
- Travel Expenses: Costs incurred for content creation purposes.
- Home Office Expenses: If you have a designated area for content creation.
VAT and Expense Deductions
If you're VAT registered, understand how to reclaim VAT on your business purchases. Keep accurate records of your VAT expenses and ensure compliance with HMRC guidelines on VAT reclaims.
Allocating Expenses Between Personal and Business Use
Determine the business-use percentage of shared expenses like internet and phone bills, and only deduct the portion used for business. Keep a log to document the business use of shared expenses to support your deduction
What Next?
TikTok offers opportunities to earn significant income from your content. However, understanding the financial and tax aspects of TikTok monetisation in the UK requires awareness, preparation, and guidance.
Our team at MJ Kane, aims to help keep you right. Schedule a free consultation call today to discuss your circumstances and understand what you need to do. If you already have a grasp, you may benefit more from one of our tax advice/planning meetings.
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