Do You Have To Pay Tax On YouTube Earnings?
20th October 2016
If your Youtube channel's going well enough that you're making money then it's not just your fans who'll be taking notice. As your income rises with your celebrity, so too will the amount of it you owe to HMRC and telling them "it's just a hobby" won't count for much if you haven't declared that income through self assessment tax returns.
Just as there's a difference between selling the occasional unwanted possession on eBay and running a retail business through it, there's a difference between running a blog or podcast and being a professional journalist. You may not know exactly when you've crossed that very blurred line, but you can be sure HMRC's going to have an opinion on the matter.
If people are paying you for something, and you're supplying it to them, there's a chance you're running a business. It doesn't matter if you're just doing it because its something you enjoy, or if you're already employed in another job during the day . Success stories about people making money from sites like YouTube and Patreon are encouraging more and more people to dive into some of the murkiest waters in the UK tax law swamp. There are worse things than alligators down there. If you're careless with the rules, you could find yourself dragged down to the bottom by an investigation from the taxman.
Some internet sites allow you to post videos or other original content on them. That's fair enough. In some cases, you can let those sites slap some paid advertising around your videos and split the money with them. That's still great - but you have to understand how HMRC thinks. You may very well consider that advertising revenue to be a little extra pocket money, but the taxman will quickly start to call it taxable income - and that means he'll be expecting it to show up on a Self Assessment tax return.
If you're using something like Patreon, you're actually taking money directly from people, not just getting your cut from an advertising network, to supply them with whatever your content or product is. They might be paying monthly or only whenever you put something out, but you're still making an income from it. It doesn't matter if you don't think of it as your "job". The point is there's money coming in and that means you have to declare it to HMRC. If your income is already over the personal allowance threshold then they're going to want a bite of it.
A lot of people simply assume that no one's ever going to catch them, or bother chasing them. They may even be right, but "I didn't think I'd get caught" is a weak defence against an HMRC tax-dodging accusation and it won't get you out of many of the nasty penalties that will be stacking up if you miss the deadlines for not filing your self assessment.
Of course, if you've got income you've probably got expenses, too. Again, there are rules you've got to get to grips with. If you're a photographer, buying a camera might count as a business expense now, rather than just something you bought for yourself. Taking a photo of your house and then claiming for the bricks would be a bad move, though.
The bottom line is you have to think about what you're doing. More specifically, think about how it looks to HMRC. When in doubt, get in touch with us to find out if you need to submit a self assessment tax return and get a quote from us to help you. Technology is moving faster than the law in many online areas and you don't want to end up on the wrong side of it as a test case.