Avoid overpaying your income tax as a Youtuber. You might not even have to pay without knowing it!
In this blog I will give you a walkthrough on how to check if you need to pay tax as a Youtuber in the UK using a free online tool on the HMRC website. I cover several scenarious where being a Youtuber can be taxed differently. I also explain financial and accounting conceps in a simple way which you’ll need to know when doing your taxes in the UK as a digital content creator on Youtube, or on any other platform.
You’d be surprised by the number of cases where you don’t actually have to pay tax on your earnings just because it falls into a different category. And just before we got into it, it’s worth mentioning that this is specifically for the UK because we’ll be using HMRC services for this.
You need to go on this URL gov.uk/check-if-you-need-tax-return
Here you can find a pretty cool test that HMRC allows you to do for free.
Did you work for yourself between 6th April and 5th of April?
It’s worth mentioning that the financial year in the UK starts from the 6th of April one year and finishes on the 5th of April the following year. I’m going to answer yes.
As a YouTuber you can be self-employed. So me as an individual I can be a YouTuber, use my personal name so all the digital assets, basically the website, the videos, all the branding will be mine, personally, as an individual and all of the money will go personal in my personal bank account. And then I will need to file a tax return on the income that comes in my personal bank account. So in this case I’m going to say “self-employed as a sole trader”.
Did you earn more than a thousand from working for yourself?
Let’s say I’ve earned more than a thousand. If you do, they do tell you need to submit the self-assessment tax return.
You have a threshold of 1000 pounds that you can make per year without declaring it and without paying any tax on it. In this case we’ve answered that we are making more than 1000 pounds as a YouTuber so we’re going to probably be paying tax.
However, it’s worth mentioning that actually we’re not going to be paying tax because the minimum bracket is £12,500 in the UK as a minimum tax bracket so we’ll actually be paying tax on anything above £12,500.
But when you actually submit a self-assessment tax return you can say “I’m a YouTuber, I’m earning 5000 pounds” and they’re going to tell you “if you don’t have any other income then we’re not going to charge you any tax so thank you for letting us know you have 5000 pounds per year as a YouTuber but we’re not going to charge you tax because you’re allowed to have £12,500”. Regardless, they do want the self-assessment tax return to be submitted anyway.
They do want to know how much you’re making but they’re not going to make you pay tax unless you’re earning above the minimum threshold.
So what happens if you’re a YouTuber but you’re not self-employed or acting as a sole trader?
What happens if you’re a YouTuber but you’ve actually started to build your own brand?
So you’ve created a limited company and you’ve started to do YouTube and build your own website through that limited company in which actually you’re the shareholder in. Here you can click “director of a limited company”.
To be honest this is what I’m doing with YouTube now myself. I’ve created a limited company for my own brand and I’m starting to do YouTube via the company because I have other income streams that are generating income for me as an individual. So when I pass the next income threshold which is 50,000 pounds in the UK, I’ll start to pay 40% and all of my earnings above that… Which is a lot of money!!!
So that’s why I’ve decided to start making YouTube where the corporate tax rate is always 19%. Even from now I’m already saving money on tax because I’m earning 20% on all my other earnings that are paying me as individual and all my earnings in the YouTube company are actually taxed on 19%. So I’m even saving 1% starting from now.
So let’s look at that example.
Did you work as an off-payroll worker?
When you’re working in a company they can have payroll or not. They can be paying you as an hourly rate, as a commission, as a freelancer or they can have you on payroll.
Having you on payroll means they’re having you on a salary on a monthly basis. Opposite to that is an off-payroll worker. An off-payroll worker is also sometimes called a contractor.
In this case we’re the owner of the YouTube company so we want to get the regular salary of the income of the company so I’m gonna say no.
Did you get a pension?
I’m gonna make all this simple and say no.
What was your total income for the year?
I’m gonna say below £50,000 because statistically that’s what most people in the UK get.
Did any of your income come from UK property or land?
I’m just gonna answer no here.
Question number seven: Did you get more than 10 000 from dividends or savings and investments?
Answer whatever your case is but in our case as a Youtube we can say no.
Question number eight: Do you need to pay tax on any of the following?
Income from trust, income from outside UK, two and a half thousand or more and commission or cash and hand payments, a payment or charge on a private pension, a self-employment income support.
I’m gonna select none of these for simplicity.
Do you need to pay any capital gains tax?
Now this is when you sell personal possessions worth more than £6000.
In this case let’s say we’re a YouTube company and we don’t have anything like that so I’m just gonna say no. Unless you’ve made money by selling your YouTube company or part of it, for example 50% of the shares, 49% ideally.
Did you hold a position that affects how you’re taxed?
All of this are really not applicable for most viewers so I would say no.
Result: You do not need to send a self-assessment tax return.
You remember us telling them that we’re not a contractor, we are getting a salary from the YouTube company, we’re not an off-payroll worker. This is because usually if you’re on payroll then it’s the company’s responsibility.
By paying your payroll they also pay tax to HMRC. So that’s why you do not need to submit any self-assessment tax return when you are on payroll. That’s somebody else’s responsibility.
Even though the YouTube company is yours, you as an individual do not need to submit a self-assessment tax return. Your company’s accountants need to sort that out.
Now let’s get back to this stage where let’s say we do not want to get salary from our company. We just want to make sure the YouTube company keeps growing and we’re not taking any salary.
Did you work as an off-payroll worker? 2nd time
I’m just going to say yes because every now and again if you need some money you can take it out and make your YouTube company pay you as a contractor, let’s say for video editing. So you need some money in your individual bank account, not in the company’s because you’re not allowed to spend that money. So I’m going to say yes.
So you can see you have new questions now.
Do you have a student loan?
I’m going to say no for simplicity purposes.
Do you get a pension?
No.
Total income for the year?
Below £50 000.
Any income from property?
No.
Any dividends or interest?
No.
None of these.
Capital gains?
No.
Holder position?
No.
Result – Do we need to submit a self-assessment tax?
No.
And just in case you have a student loan let’s answer yes to that.
And in that case, they do want you to submit a self-assessment tax return because in order for you to pay the student loan they do need to know how much you’re making because the student loan is a percentage of the amount of money you’re making. If it’s above the minimum threshold then the percentage is going to be applied on that and you’re going to be paying a student loan on that.
Hope this blog on Youtuber tax was helpful. Bye!
