Everyone loves stash…including the Tax man
Disclaimer - we are not qualified whatsoever to give any tax advice…but let’s do it anyway…
So you’re a brand ambassador, a social media influencer or sponsored athlete living that sweet sweet ‘free stash’ life, getting given all the waviest gear to in turn create content and promote the brand/products to your engaged audience.
But as the saying goes, nothing in life is free…
It is important that any would-be ambassadors are aware of what constitutes ‘payment’ in the eyes of HMRC, especially when so many brands continue to prefer to pay for services in product rather than cash money…
Ambassadors are legally obliged to declare the financial value of any items received as a payment-in-kind, as part of your annual tax return.
It is up to you to correctly find this out, ideally this is listed out in your contracted agreement, but if not we suggest you require this level of detail before you sign. It’s important as you will likely need this confirmed in the future.
It is obviously much easier to translate paid-for content as a taxable value ( there is normally a fee agreed between parties), but it’s often tougher to work this out with the all too common ‘payments-in-kind’ agreements. This is where products or experiences are given to creator in return for an agreed level of support - but basically as a rule of thumb if it’s a gift in exchange for endorsement, it’s considered a payment-in-kind.
So what is classed as an endorsable, sponsored or free product?
Broadly speaking, for tax purposes, the main things to account for as a brand ambassador are the folllowing:
Paid for posts
Products to review
Freebies
The Competition and Markets Authority (CMA) defines a payment as, “Any form of reward, including money, gifts of services or products, or the loan of a product” and this applies even if the you get sent it without notice as a speculative freebie - in which case if you get sent something super expensive think twice before opening it!
Tax on Paid Posts is a regular question we get given its such an easy and common influencer output - Essentially if you are being paid for the posts and your income in one year exceeds the trading allowance then you will have to register for self assessment and pay the correct amount of tax according to how balling you are.
There are some things to consider before you start panicking about paying tax on your next YouTube video:
Can it be converted to cash? When you’re gifted products be aware whether it can be converted into money or not. If the product/service cannot be converted to money (sold one) then typically you won't have to declare it.
Trading Allowance: There is a general trading allowance of up to £ 1000 tax free, which is in an addition to the existing personal allowance. So if you earn less than £1000 per year you don't have to declare it.
Trading or non trading: Social Influencer is not a widely legislated industry and HMRC is still sometimes unclear if their income is trading or non-trading, especially if it is still a side hustle, done in your spare time on a casual basis which will be likely be considered non trading. Non trading is great as it means no tax on those freebies.
But all is not lost…
If you consider yourself a professional online influencer, you will likely be self employed, so can also claim back a proportion of certain legit business expenses . This will reduce your taxable income, as they’re considered essential operation costs and you can likely claim against the outgoing spend.
Spend on things like:
Essential travel specifically for that job/project
Phone and internet for non-personal use.
Digital marketing or subscription costs
Equipment like a Mac, a camera, lighting or mics if you need it for content.
But really what this all boils down to is the fact that you should 100% find yourself some trustworthy financial advice or risk getting poor advice a blog post that you read somewhere online one day 😉
