You must declare your TikTok income

Accountants Chester – Tax Tip No. 11

Since 2020, millions of us have flocked to the online streets of TikTok and have made a penny or two. But now you have to tell HMRC exactly what you’ve made.

TikTok is the world’s largest short-form video-sharing platform with a unique algorithm that helps people worldwide see your content and vice-versa. While it started off as just that, a video-sharing platform, it has grown into a platform for awareness, shopping, connectivity and more. Because of this, there are now various ways you can gain pennies in your pocket and one reason you need to be thinking about something called a self-assessment tax return.

We know you might have some questions weighing heavy on your noggin about your TikTok earnings, so we’ve put together an FAQ for you. This way, you can stay in-the-know about your TikTok gifts, promotions and more.

Do I have to declare my earnings as a TikToker?

Yes and no. The answer to this question wholly relies on how much you’ve earned from the platform. 

If you’ve earned £1,000 or more between April 6th and April 5th from TikTok (and other platforms such as Instagram and YouTube, together), you’ll have to let HMRC know. This also includes any other passive income you’ve made outside your regular job or being on the payroll. For example, if you sell cakes, blogs or childminding services. 

Altogether, if you’ve made more than that £1,000 threshold, it’s time to complete a self-assessment tax return.

How much TikTok earnings can i make before being taxed?

Even if you’ve made over the £1,000 declaration threshold in the tax year, it doesn’t mean you have to pay tax on it. 

There’s another threshold to keep in mind when it comes to actually paying your tax rather than simply declaring it and this involves all the income you’ve earned in the tax year. This threshold is £12,570 and once you’ve made this amount, you have to start paying the basic rate (20%) of tax. 

For example, you may have earned £10,000 at your job and another £5,000 from TikTok. Together, you’ll only be paying 20% tax on £2,430 instead of on all of it.

Which TikTok earnings need to be declared?

As TikTok has evolved (and continues to evolve) there are more and more ways to make additional income through the platform. All revenue streams count towards the TikTok passive income that you have to declare to HMRC at the end of the tax year. Right now, there are 4 main streams:

TikTok Creator Fund

The Creator Fund is a percentage TikTok will pay you relative to the views your videos accrue in a month. To be eligible for the Creator Fund, you have to be over the age of 18, have over 10 thousand “authentic” followers and have over 100 thousand “authentic” video views in the last 30 days. 

TikTok Gifts (Creator Next)

After you’ve got at least 100 thousand “authentic” followers and you’re still receiving a good number of active views on your videos, you can be eligible for Creator Next. This allows viewers to send you gifts such as stickers in live videos and diamonds in your comments that you can redeem into real currencies.

Brand Affiliate Marketing Deals

This isn’t through TikTok but involves the platform. Brands and businesses may contact you requesting that you market their goods. These are affiliate marketing deals and the brands will pay you directly. You’ll either be paid royalties for units you sell, a flat fee for advertising or assets in the brand.

TikTok Shop (Pixel)

In the most recent turn of events, TikTok has opened up the platform for e-commerce. Because of this, there is now something called the TikTok shop where you can house, promote and sell your items through the platform and your videos. This is an especially important section as VAT may be applied to some goods!

Will HMRC know if I don’t declare my TikTok income?

Yes. There are three ways HMRC will be made aware of your TikTok income if you’ve not declared it. 

Firstly, TikTok has a good relationship with HMRC. They say they’ll “engage with a Customer Compliance Manager to help HMRC better understand our business and to openly and proactively discuss any relevant tax issue that may arise.”. 

Secondly, with the new Making Tax Digital regime, HMRC can conduct random audits and view your accounts. They could do this before the Making Tax Digital scheme, but the new scheme makes it even easier for them to access and assess your financial situation. 

Thirdly, too many people out there can both accidentally report you and intentionally report you. HMRC can reward reporters of tax avoidance and many companies will use you as a tax expense, meaning HMRC knows you have something to declare.

Do I need to use an accountant as a TikToker?

While you may not need an accountant by law, it’s the safest option. Not only will they be able to ensure you’re reporting and paying HMRC the right amount, but they can also identify opportunities for you to declare expenses that reduce the amount you owe. 

When you use a TikTok accountant, all you need to do is keep a record of what you buy and what money comes into your account. Then, forward this information to your accountant and they’ll be able to do the rest for you. The final step is downloading the new HMRC app and paying the balance before the 31st of January the following year.

How do I declare TikTok income to HMRC?

Now you know you have to, let us run through the steps to take when declaring your TikTok earnings to HMRC.

Step 1: Register as self-employed with HMRC

Step 2: Wait for your UTR number to arrive

Step 3: Log in to HMRC with your UTR number

Step 4: Find a trusted virtual TikTok accountant

Step 5: Send them your incomings and outgoings

Step 6: Receive your tax return from your accountant

Step 7: Approve the tax return

Step 8: Wait for the amount to populate on HMRC

Step 9: Pay your outstanding balance.

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