Is my OnlyFans income taxable?

Oct 5, 2020OnlyFans, Tax, VAT

OnlyFans Taxable Income

Recent claims have shown content creators earning up to £30,000 per month through OnlyFans!

It’s no surprise we’ve been asked a lot of questions surrounding if and how you should be paying tax on your income.

We’ll cover everything in this blog post! 💪

Along with some common questions we get asked! 

What do I need to consider?

Firstly, let’s establish the different types of taxes that may arise from your OnlyFans income:

  1. Income Tax (Direct Tax)
  2. VAT (Indirect Tax)

Secondly, we need to consider how you’re earning your income through OnlyFans, as different types of income have different types of taxes attached to them. For simplicity let’s assume your earnings are coming from:

  1. Fan Subscriptions – paid out from OnlyFans, and
  2. Donations/Gifts – paid directly from your followers

With these basic to hands, let’s dive into the detail!

Income Tax.

As mentioned above there are two main branches of tax you need to be aware of, the first and most common would be Income Tax, which is referred to as a Direct Tax. It’s called a Direct Tax because it’s paid directly to HMRC by an individual – yourself.

Simply put, it’s a percentage of your ‘profits’ that are payable to HMRC, it’s important to distinguish the difference between your earnings (what OnlyFans pays you) and your ‘profits’ which are your earnings less any allowable tax-deductible expenses.

As a rule of thumb, a basic-rated taxpayer can expect to pay 20% income tax on any profits, after the current £12,500 tax-free allowance has been used up. Having different sources of income can eat into the tax-free allowances, and there are also potential National Insurance taxes and Student Loan repayments which will get factored in. As such, it’s always best to contact us if you’d like an accurate tax forecast!

When do I register for Income Tax and how do I pay it?

The simple answer is… if you earn more than £1,000 a year, you need to register with HMRC as self-employed and submit a yearly self-assessment tax return!

The tax year runs from 06 April to 05 April, and you’ll be expected to register with HMRC by 05 October that year, in order to pay your taxes by 31 January the next year! To add even more dates to your calendar, you might have to pay next years expected taxes upfront – called ‘payments on account’. These are paid in two instalments of 50% each, the first on 31 January, the second on 31 July.

We always recommend planning this in advance by contacting an accountant as soon as you start earning, so you’re fully aware of the deadlines and payment dates & amounts – plan early! Initial consultations are FREE so there’s no excuse to delay it!

Can I reduce the tax I pay?

As previously mentioned, you pay tax on your profits, which are your earnings less and allowable expenses. This is where we can really step in with our tax expertise and start saving you some money!

Depending on the type of content you’re putting out, there is a variety of expenses you can claim. A Streamers expenses will be different from a Model, and so as before – give us a shout if you want some tailored advice. Don’t depend on Google education for this! It’s a complicated area that can land you in trouble if you get it wrong.

Are all my earnings subject to Income Tax?

Yes!

Next… 🤓

To elaborate, any form of income paid to you is deemed a type of earning, and so whether the payments come from OnlyFans subscription, Donations or Gifts, they all get taxed. So, using the two examples of income above:

  1. Fan subscriptions – taxable
  2. Donations – taxable

VAT (Value Added Tax).

Slightly more complicated than the prior is VAT. This is what we call an Indirect Tax, meaning the tax is collected by the content creator and paid to HMRC on behalf of the consumer… sound confusing? Basically, your fans pay 20% VAT on their subscription, which you then pay to HMRC.

UK VAT is notoriously complicated, so for this purpose we’ll assume the Creator is a UK taxpayer, and as at the time of writing OnlyFans is still a UK-based company.

Below is a great illustration of how VAT is handled for UK VAT registered Creators that have provided OnlyFans with a valid VAT registration number.

Do I need to register for VAT?

You only need to register for VAT if your taxable turnover (earnings) are above £85,000 across a 12 month period.

It’s important to remember that most types of income will form part of this taxable turnover figure, so if you’re earning anywhere near that sum it’s best to get in contact for complete clarity.

Can I voluntarily register for VAT if I earn less than £85,000?

In certain cases, yes you can.

Where you have a commercial reason to, you can voluntarily VAT register if you earn less than the current threshold of £85,000. The benefits to doing this is the ability to potentially reclaim VAT back on your business expenses.

As VAT is such a complex area, registrations should be approached with caution. You shouldn’t register yourselves till you’ve spoken to a professional, to ensure you’re aware of all the benefits, drawbacks and potential pitfalls!

It’s an area littered with legislation, investigations and penalties, so be careful!

How do I let OnlyFans know I’m VAT registered?

This one is easy, apparently. You simply provide them your VAT registration number.

OnlyFans will update your records and produce you a monthly VAT statement which can be found in the ‘Bank’ section of your profile. You can then pass this across to your accountant each month to include in your VAT returns.

Will my fans have to pay more if they’re VAT registered?

Nope.

Your fans will already be paying VAT based on the VAT registration status of OnlyFans (not your own registered status). Whether VAT is payable is also dependent on the location the fans are based at, but… we won’t bore you with those complexities.

Are all my earnings subject to VAT?

You do not have to pay or charge VAT on all your earnings, different types of income and expenses have different VAT rates and treatments.

All of the above is specifically related to your OnlyFans subscription payments. Any external donations or gifted money will not give rise to VAT due to HMRC as they are ‘outside the scope’ of UK VAT. So, using our two examples of income:

  1. Fan subscriptions – VAT due
  2. Donations – No VAT due.

Extra things to consider!

There are legitimate ways to reduce your taxes if you’re earning well through OnlyFans, or Twitch, YouTube, Amazon etc for that matter.

One of the most common would be the formation of a Limited Company. Whilst all the VAT rules above would still apply, the process in which your Income is declared and tax paid is changed dramatically. Therefore we recommend considering further talks about this if you’re earning above £30,000 per year from all your Content Creation activities.

You should always seek advice from day #1 if you run a Limited Company, so make sure you contact professionals beforehand!

How we can help!

Rather than redirect you to a mixture of our service pages which may/may not be right for you, we encourage you to get in contact with us for a quick chat to discuss your current situation.

Whether you’re just starting out or earning that £30k per month bracket, we have got a level of help just for you!

We hope this post is helpful!

Keep on creating content and pushing the boundaries! 🙌

 

Feel free to get in contact with us if you’d like to discuss your situation further. Even if you’ve just started out, it’s best to plan ahead.

Want a little more information about how we can help? Check out our ‘Influencers‘ page for more detail.

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