Decoding the double life of ad revenue: tax and regulation for influencers

Decoding the double life of ad revenue: tax and regulation for influencers Alex Robertson March 8, 2024

Influencers have a variety of income sources, but advertising, affiliate and sponsorship revenue can attract different tax regulations. And that’s just the start of it.

For influencers, ad revenue is the lifeblood of their careers. However, this seemingly straightforward income stream gets surprisingly complex when it comes to taxes and regulations. Here’s why navigating the ad revenue landscape involves playing a complicated game:

Taxation choices
Self-Employed vs. Employee: Unlike traditional employees, influencers mostly operate as self-employed individuals, meaning they’re responsible for calculating and paying Income Tax and National Insurance (NI) contributions. This translates to more paperwork and filing responsibilities (but we can help with that, obviously).

Income Variety, Tax Complexity: Ad revenue comes in various forms, from sponsored posts to affiliate links. Each type might have different tax implications. For instance, affiliate marketing income might be subject to VAT if exceeding the £85,000
threshold, while sponsored posts typically fall under income tax.

Expenses (and keeping records): While managing finances, remember expenses like travel, equipment, and software can be deducted from your taxable income. Keeping meticulous records is crucial for maximising tax efficiency.

Tax on gifts: Don’t be fooled by "free" products or experiences. Depending on their value, they might be considered taxable gifts, adding another layer to your tax calculations. And keep on the right side of regulation.

Disclosure Dilemma: The Advertising Standards Authority (ASA) demands transparency. Clearly label sponsored content using #ad or ‘paid partnership’; to avoid misleading viewers and potential fines. This adds another layer of responsibility
compared to traditional advertising, where disclosure might be handled by the advertiser.

Contractual details: Contracts with brands often contain intricate clauses regarding intellectual property rights, payment terms, and brand guidelines. Understanding these nuances is crucial to avoid legal issues and ensure fair compensation.

Data privacy dos and don’ts: If you’re working off your own website, and collecting, for example, email addresses, then respecting your audience’s data privacy is vital. Obtain consent for data collection and adhere to General Data Protection Regulation (GDPR) requirements. This involves transparency, security measures, and user rights, adding another responsibility compared to traditional media where data collection might be handled by the platforms.

Intellectual Property: Ensure you have legal rights to use any copyrighted material (music, images) in your sponsored content. Seek licences where necessary to avoid copyright infringement issues, adding another legal hurdle compared to using self-
created content. The reason for this tax and regulatory complexity boils down to the unique nature of influencer marketing. Influencers aren’t employees of traditional companies, but they also aren’t entirely independent businesses. They operate in a grey area, requiring them to navigate both self employment rules and advertising regulations.

The first thing you should always do is to keep meticulous records of income, expenses, and contracts. This will simplify tax filing and help you defend your position if necessary.

The second is to stay informed on tax regulations, advertising laws and data privacy policies. The landscape is constantly evolving, and staying ahead of the curve is crucial. Get in touch with us and see how our business and tax services can help keep you on top.