As your social media followers increase, your channel grows and your income streams diversify, before you know it you’re making money as a result of your social media presence – you should congratulate yourself!
This could mean you are seen as being a business in the eyes of the HMRC. If you’re self-employed, then any profits you make in each financial year will be taxed. Have you considered running your business through a limited company? There are a number of reasons why this could benefit you:
– Companies pay a lower rate of tax on profits compared to individuals;
– There is greater flexibility as to how income can be paid from a company. For example, you could pay yourself dividends (which can only be paid by companies). Dividends are taxed at significantly lower rates of tax compared to profits if you are self-employed. Dividends are also not liable to National Insurance Contributions.
– There is also more flexibility as to who could receive income from the business. You might wish to pay a salary or a dividend to your spouse, for example, if they help out with the channel.
– You can decide the timing of when you receive income from your company. For example, if you have had a particularly profitable year you can keep your personal income at a level which means you only pay the lower rates of tax. You have complete freedom to decide whether you pay yourself an income or keep the money in the company.
As your growth continues, it’s always a worthwhile discussion with your accountant about whether you have the correct structure in place.
If you can structure your business as tax efficiently as possible you will pay less money across to HMRC in tax, which means more money available to reinvest into the business (or put towards a holiday!) – so it is definitely a valuable conversation!
Please get in touch if you want to chat, the Inspire for Creators team are always happy to help. Email firstname.lastname@example.org