So you’ve done it. You’ve put in the hard work, you’ve been consistent and you’ve grown your following – a major accomplishment! Now all your effort is paying off and you are seeing money come in. There’s only one problem. You aren’t sure of the best way to handle your finances. Are you self-employed? What expenses can you claim? What about tax? Do you need accounting services? At Thomas & Co Accounting, we specialise accounting for influencers and accounting for content creators – we work with them every day. We know the answers to the questions you didn’t even know you had.
In this article we have compiled our 7 essential financial tips for influencers and content creators based on years of experience – you can thank us later.
1. Make the most of accounting software
Whether you’re a social media influencer, a YouTube content creator or a Twitch streamer, you’re probably utilising software to get the best results. Why should your accounting be any different?
Whether you are doing your accounting in house, or working with an accountant, using accounting software is an easy way to remain financially compliant. You can utilise features such as:
- creating and sending invoices (including automated reminders for overdue invoices)
- calculating VAT returns
- tracking and paying bills
- bank reconciliation
- financial reporting
- uploading expense receipts via an app
- endless more features
Some accountants include software licences in their packages, so if you choose to work with one make sure you ask! At Thomas & Co Accounting, all our clients receive access to Xero and Dext as standard.
2. Affiliate revenue and gifted items are income too
Affiliate links are a great way to make money online, but did you know that you should be recording this income too? It can be easy to overlook as affiliate revenue may be small and as you don’t raise invoices for it, so there is nothing to reconcile against. You must record this income as “money in” to remain tax complaint.
It’s easy to think of gifted items as just that – gifts. However, in the influencer world gifted items are often in exchange for social media posts or reviews of the products gifted. If this is the case for you, you must tread carefully. Ensure you keep a record of any agreement you have and declare the goods as “payment in kind” on your tax return.
3. Know which expenses you can claim back
As a sole trader or limited company you need to record all your expenses. Most accounting software’s make this easy by linking to your bank feed and allowing you to record each transaction, they’ll even calculate the VAT for you. Some of your expenses however are going to be “allowable”. This means you can claim these expenses back, reducing the amount of income you pay tax on. This is also known as tax relief.
Here are some examples of allowable expenses that you may not have thought about:
- a percentage of your household costs if you work from home
- travel costs for business purposes including business meals, public transport, or mileage if using your own car
- business mobile phone bills
- items you purchased to review
- any equipment purchased for business use (cameras, tripods, computers etc)
- marketing, advertising and website costs
- legal costs and accounting fees
It is always best to speak to your accountant if you aren’t sure which expenses are allowable.
4. Understand your taxes
Whether you are registered as a sole trader or a limited company will affect how you pay tax.
Sole traders need to submit a self-assessment tax return each tax year. If your business has become a limited company your obligations are greater, including filing a company tax return and paying corporation tax. Get in touch with your accountant for more information.
5. When to think about setting up a limited company
If things are going well and more money is starting to come in, it might be time to think about how you can be more tax efficient. As an influencer or content creator, it is likely that you started your journey being self employed as a sole trader. In this instance you were paying income tax in similar way to if you were employed. However, It is important to recognise when the financial success gets to a point where it would be advisable to register as a limited company.
When you are self-employed you are subject to variable tax bands, whereas limited companies will only ever pay corporation tax (currently 19%) on taxable profit. You will have to pay more tax on any money you withdraw from the business, but any money left in the business will only be charged at the 19% corporation tax rate. Another benefit of registering as a limited company is separating the company’s finances from your personal finances. This gives you limited liability and protects your personal assets.
If you aren’t sure the right time to set up a limited company it’s best to speak to your accountant or financial advisor, or seek accounting services if you don’t already have an agreement in place.
6. Remember your pension
Planning for your financial future is good practise, and knowing that there is a pot of money waiting for you at pension age can be a huge comfort.
If you are operating as a limited company, paying into a personal pension scheme is tax deductible meaning you can pay yourself a little more without paying tax or national insurance. Obviously you can’t access this money until you are of pension age without incurring charges, but it is still a good option for withdrawing money from your business.
7. Find the right accountant for you
Finding an accountant that is actively helping you grow your business can be more difficult than you think. In our experience, it’s best to work with professionals who understand the needs of your industry instead of providing generic services. At Thomas & Co Accounting we work with influencers and content creators everyday – we know the best way to support you. Let us put your mind at ease and tailor a service just for you. Get in touch for more information on our services.
