Millions of social media users and content creators across the UK are being warned they could face fines of up to £1,000 from HM Revenue and Customs (HMRC) for failing to declare online earnings. This crackdown targets individuals who earn money or receive gifts through platforms like TikTok and Instagram but neglect their tax obligations.
The £1,000 Trading Allowance and the Pitfalls for Creators
The central issue revolves around HMRC's £1,000 trading allowance. This is the amount you can earn from side hustles or self-employment before you need to declare it to the tax authority. However, the average social media earner now makes £1,223 per year, a figure that unknowingly pushes many £223 over this limit.
Heather Cobb, UK Managing Director at the business financial platform Tide, highlighted the risks. "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 said.
"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." She specifically warned that the value of gifted items received in exchange for promotional posts also counts towards the £1,000 threshold.
Substantial Penalties for Non-Compliance
Breaching this limit without notifying HMRC can trigger a series of penalties. These are not small fixed fees but can be substantial financial blows.
"This can range from a ‘failure to notify’ penalty to late return and payment penalties," Cobb explained. "As these penalties are often based on a percentage of the tax owed, they can amount to substantial sums for millions of creators to cover."
To avoid this, her advice is to keep meticulous financial records from the very first payment. She recommends opening a separate business account for each venture and using accounting tools to track earnings and expenses accurately.
From Side Hustle to Thriving Business
Megan Paul, a content creator and founder of Gel by Megan in Warwickshire, is a success story. "What started out as me posting photos of my nails on Instagram as a creative outlet alongside my 'day job' in the civil service, quickly grew to thousands of followers, brand partnerships, sponsored posts and now my own training academy," she shared.
After taking the leap into self-employment four years ago, she acknowledges that taxes can be intimidating but urges others to take their projects seriously. "Taxes and self-assessments may feel scary, but most areas have thriving small business communities that you can lean on for advice," Paul noted, adding that modern business platforms can significantly reduce administrative stress.
Her final piece of advice for anyone earning extra income from a passion project is to view it as a potential business and understand the associated financial responsibilities from the outset.
