TikTok Tax Guide
Here is all you need to know and learn about creating content
and earning money through TikTok!
TikTok is the world’s biggest short-form video platform. If you haven’t yet checked it out, taking one glance you can find you’ve spent 30 minutes watching videos of cooking tutorials and dance routines just like that.
TikTok’s also produced a huge number of paid gigs for creators who consistently put out content which has people coming back for more. Since the pandemic began in 2020 stat site Statista reports there to be around 3.1 million creators/ Influencers on the app. Each of them making some level of income whether it’s through direct payments from TikTok or paid campaigns with brands.
Seeing this, you might wonder what exactly a TikTok influencer/creator is and how much you could make in the business as well as how much tax you’d have to pay.
What is a TikTok Influencer?
According to TikTok marketing platform Fanbytes, a TikTok influencer is someone with over 1,000 followers, who’s videos get high engagement and who has built fans through regular posts. However, in order to be recognised by TikTok themselves and receive payments directly from their creator fund you need at least 10,000 followers, 100,000 video views in the last 30 days and a Pro account. So there’s some work to do.
To give you an idea of scale:
Nano influencer: <50,000 followers
Micro influencer: 50,000-150,000 followers
Influencer: 150,000 - 500,000 followers
Marco influencer: 500,000 - 1 million followers
Mega influencer: >1 million followers
It’s believed that TikTok’s algorithm makes it easier to achieve influencer status than on competitor platforms such as YouTube and Instagram. This is because its algorithm better matches your content with an audience who’ll enjoy it.
So if you like making short form videos and have a particular interest that could be your USP (it could be anything from baking to cycling) then you could try creating regular posts showing what you do. Just remember there's lots of people out there with so many would-be influencers could be doing similar things.
How to become a TikTok Creator
The process to register an account on the platform is very simple and free! You'll first need to download the TikTok app on your phone, open it and and register with whatever method you prefer. After this, TikTok will ask you to provide them with some basic information such as your birthday, phone number and email (if you haven't signed up with those already). Lastly, you'll be asked to select what you're interested about from a list of topic, so that the algorithm can provide you with the best content.
At this point, you can start creating your content and attract the biggest number of followers that you can!
How to make money as a TikTok Influencer
Typically the more followers you have the more money you can make, as brands look to influencers with the biggest reach for promoting their products.
However, it's not just as an influencer that you make money through TikTok. Music producers can have a song go viral on the platform and have a high chance of it charting in a few countries. Another popular use for TikTok is to sell merchandise. Or you can promote any other form of work, whether you’re a mechanic tuning cars or a children’s entertainer, you can find the right audience using the app.
But as an influencer there are a couple of methods for earning money.
The TikTok creator fund
In the UK the TikTok creator fund is part of Creator Next which helps creators up their content game, giving them access to a network of brands, tips and gifts.
To meet the criteria you need to be 18+, have 10k+ followers, have 100k+ views in the last 30 days, and have 3+ videos in the last 30 days.
According to Hootsuite it’s estimated you can earn 2 to 4 cents for every 1,000 views. Which isn’t much but the idea is that you start to hit millions of views on a regular basis through the Creator Next support.
Being paid by brands to promote them and their products
This can really vary depending on your niche and following. Some industries will pay more depending on their product and the scope of their campaign. But as a general guideline, Influencer Marketing Hub estimate:
Nano-influencers: $5–$25 (£4.32-£21.60) per post
Micro-influencers: $25–$125 (£21.60-£107.90) per post
Mid-tier influencers: $125–$1,250 (£107.90-£1,079) per post
Macro-influencers: $1,250–$2,500 (£1,079-£2,157.90) per post
Mega-influencers: $2,500+ (£2,157.90+) per post
Receiving gifts and tips from followers
Live Gifts is a new feature wich came in at the end of last year. Influencers can now receive tips directly from followers through TikTok. These tips come in the form of TikTok Coins and TikTok Diamonds and can be transferred into cash by the recipient.
Users are able to tip up to $100 (£86) per transaction and up to $500 (£431) dollars per day.
Affiliate marketing isn’t dissimilar to being paid directly by brands to promote their product. The difference is that you’re given a discount link to promote their products and then you’ll receive a certain percentage of the purchase made through the link. So it’s down to you to get it out there as much as possible. The more people who buy, the more money you’ll make.
TikTok Pixel (Shopify)
If you already have a website and you want to promote your products, TikTok Pixel allows you to make TikTok users costumers.
It allows you to manage your TikTok ads directly from Shopify, tracking the impact your ads have and the activity on your website from users. Most importantly you can monitor sales, user activity and acquire quality information to find your audiences.
Do I need to pay tax? And how do I pay tax?
TikTok Tax O’clock. This'll all depend on how much money you make with TikTok (and outside it).
If you earned less than £1,000 a year with TikTok you do not need to do anything. HMRC lets you earn £1,000 a year through platform like TikTok without worrying about income tax.
If you were to earn more than £1,000 a year with TikTok, you'll need to submit a tax return. This doesn't always mean you need to pay tax. It just means HMRC want to know a little bit more about your situation in case you were to start earning more in the future.
As with any self-made income you’ll need to pay tax on your revenue if you make over £12,570 in the tax year.
If you’re doing the TikTok as more of a side hustle then you’ll need to understand paying tax as a side hustle and if you’re going to be a full-time influencer then you’ll need to understand paying tax as self-employed. We can help and advise you. Submit a contact form here.
When you start out you're likely to be a sole trader in which case the bands for tax are:
Tax allowance: 0% of earnings (You’ve earned between £0 and £12,570)
Basic rate: 20% of earnings (You’ve earned between £12,571 and £50,270)
Higher rate: 40% of earnings (You’ve earned between £50,271 and £150,000)
Additional rate: 45% of earnings over £150,000
Not forgeting that you'll also need to pay National Insurance on your income if you earn over £11,908 in a year.
If you start hitting that higher rate of tax then it's worth setting up as a limited company. This'll mean you'll pay corporate tax on your earnings at 19% rather than 40%+ income tax. If you're on the basic rate it's worth remaining as a sole trader and avoiding the additional admin and costs of setting up a limited business.
Each year you'll need to fill out a self-assessment tax return. What you pay is your freelance tax bill minus the expenses of running your business. We can help with this, click here to submit a contact form.
The usual cut off date to complete your self-assessment is the 31st of January of the year after your year end (e.g. If your year end is like most 5th April (2023) then the due date for your tax return to be filed is 31st January 2024) if you’re doing it online, and 31st of October if you’re completing the form by post.
What can I expense as a TikTok influencer?
As a creator you’ll have various running costs depending on the work you do. These costs can be deducted from your taxable profit as long as they’re eligible expenses.
So if you earn £50,000 and you claim £9,000 in expenses, you’d only be taxed on £41,000 for the year.
It's important to note if you use the £1,000 tax free trading allowance then you won’t be able to claim expenses.
You can read more on what the Government considers expenses here.
For a content creator you might expense things like:
Materials that feature in your content
Transport if travel is involved
Props and set design