For those working as models or content creators in the fashion industry, it is, of course, all about the image and image rights income can be a vital component of a model’s revenue.
Earnings for a model can come from a number of sources and can vary significantly depending on several factors:
- Experience and reputation: Established models with a strong portfolio and proven track record can command much higher fees than newcomers.
- Modelling niche: High fashion models working for top brands and designers typically earn more than commercial models or those specialising in specific areas like fitness or swimwear.
- Location: Models working in major fashion hubs like London or Milan may have access to higher-paying jobs compared to those in smaller regional markets.
- Agency representation: Being signed with a reputable agency can provide access to better opportunities and potentially higher rates.
- Project type: Earnings can vary depending on the project. Runway shows might pay a flat fee, while print campaigns or commercials might offer a day rate or royalties based on usage.
All of this is, of course, taxable income, but the way this is taxed depends on the structure used to receive it. So it’s vital to pursue strategies to maximise tax efficiency, while maintaining compliance.
- Direct Income: If a model receives image rights payments directly into their personal account, the income is taxed as income tax at their marginal rate. This can be as high as 45% for high earners.
- Limited Company: Many established models choose to set up limited companies specifically to manage their image rights. Income earned flows through the company, which is subject to corporation tax at a lower rate (currently 19% in the UK). This can offer significant tax savings compared to income tax rates.
You might think, therefore, that limited companies provide a potential tax advantage, but utilising them effectively requires careful planning.
There’s the issue of ‘genuine business activity’, for example. The tax people (HMRC) remain vigilant, ensuring image rights structures for models have legitimate commercial activity beyond simply receiving and distributing income. The company should demonstrate activities like managing a modelling portfolio, negotiating contracts, or undertaking marketing efforts to build the model’s brand.
And payments made from the limited company to the model (e.g., salary, dividends) must be reasonable and reflect the services they provide to the company. Excessive payments could be seen as disguised profits and attract higher tax rates.
There are other advantages to forming a limited company and there are other ways of being tax efficient.
Our team has the experience to navigate the financial side of the modelling world, so get in touch and let’s see what we can do for you.
