Influencer culture is now a wide ranging and lucrative business. With digital platforms like Instagram, Facebook, TikTok and YouTube launching hobbyists into unexpected careers, the booming sector has disrupted how brands market to their customers, and successful influencers are reaping the rewards.
As the influencer marketing sector grows at pace, increased focus on regulation follows. As it’s a sector with ease of entry, and with over half the world’s population thought to have some form of social media presence, it’s unsurprising that some of these influencers feel unprepared for some of the business formalities that come with their new-found status – tax implications being one.
The UK games sector is now worth £7.16bn, according to industry body Ukie, and its boom has seen gaming celebrities reaping six-figure earnings – some of whom are still teenagers. The same is true of social media influencers. A Forbes article suggested that the highest paid TikTok stars collectively earned $55.5m in 2021, up 200% from the previous year.
But it’s not just the megastars of the gaming and social media world that need to become tax savvy. Brands know that followers turn to their favourite personalities for inspiration and advice on purchase decisions and it’s not necessarily follower size that counts, they’re looking for engagement. Those classed as ‘nano’ social influencers or ‘micro’ gaming creators – those with followings under 10,000 but with a loyal and engaged following – have valuable potential to be tapped.
So, at what point does social media as a hobby tip into a ‘nano’ influencer business?
Martin Frain, our tax advisory consultant, says: “Although it’s booming, the influencer sector – for both social media and gaming – is relatively new. Currently, there are no hard and fast regulatory guidelines, so it becomes a judgement call. There’s a difference between receiving a one-off product to review versus receiving regular gifts and payment; once the balance tips, there’s a responsibility to register with HMRC.”
For content creators, payment can come in a number of forms. There’s cash, such as payments for sponsorship and endorsement and, in the case of gaming, prize monies, subscriptions and public donations. There’s also payment-in-kind. For example, a social media influencer may be gifted a luxury hotel stay in return for endorsement in lieu of payment. Here lies a grey area yet to be regulated.
Martin adds: “We’re working with clients in this sector to ensure they’re protected. Their success is built on their reputation and we’re supporting them to ensure they understand what needs to be declared as income, as well as what can be claimed as an expense. Also, making sure that payment-in-kind doesn’t create cash flow problems down the line.”
As with any other sole trader or small business, the key is to get into the practice of recording everything from the outset. From there, our specialist team can support people in this sector with our expert advice for financial planning now and into the future.
To find out more, contact Martin Frain on 0161 703 2500 or email@example.com.