A major tax warning has been issued for millions of social media content creators across the UK, who could be hit with fines of up to £1,000 for failing to declare their earnings correctly.
The £1,000 Trading Allowance Rule
According to the business financial platform Tide, anyone earning additional income, including the value of gifted items from brands, must submit a self-assessment tax return if their total earnings exceed £1,000 in a single tax year. This is known as the trading allowance.
Despite this being a legal requirement, a startlingly low number of creators are aware of it. Research indicates that only 52% of social media users know they must inform HM Revenue & Customs (HMRC) once they pass this income threshold.
Substantial Financial Penalties for Non-Compliance
The penalties for missing the self-assessment deadline are severe and can accumulate quickly, creating a significant financial burden.
Initial penalties start at £100 for a late return. The situation escalates if the return remains unfiled:
- After 3 months, additional daily penalties of £10 per day can be applied, up to a maximum of £900.
- After 6 months, a further penalty of 5% of the tax due or £300, whichever is greater, is charged.
- After 12 months, another 5% or £300 charge is applied.
This means that within a single year, the penalties can amount to a substantial sum on top of the original tax bill.
Expert Advice for Content Creators
Heather Cobb, UK Managing Director at Tide, commented on the trend, stating: "It's great that TikTok, Instagram and other social platforms have opened up new ways for people to add to their income, and what might start as a bit of extra pocket money can quickly spiral into a serious side hustle."
She highlighted the common pitfall for creators: "Most people won't treat this as a legitimate business venture at first, so it can be easy to lose track of exactly how much has been made over the course of a year."
Cobb emphasised that the value of gifted items received in exchange for promotion also counts towards the £1,000 allowance, a detail many overlook.
Her advice to creators is clear: "Our advice is to keep track of what you earn from the very first payment, and Tide makes it easy to open a separate business account for each business you run." Using tools to track earnings and expenses can help creators understand if they have exceeded the allowance and need to register with HMRC, avoiding costly penalties.
