Being a YouTuber can be a dream job – but it’s a job. And that means accounts and tax and all that complications.
And navigating complex tax rules can be daunting, especially when it comes to claiming the coveted “reserved trading income” status in the UK. This status offers some tax advantages, but qualifying isn’t straightforward. So, how do you know if your YouTube work means you qualify?
First of all, the definitions: ‘Reserved trading income’ applies to profits earned from certain types of “trading activities.” In simpler terms, it applies to income generated through your personal skill and effort, rather than income solely reliant on capital or investments. For YouTubers, this could potentially include income from:
- Ad revenue: This is the bread and butter of many YouTubers.
- Sponsored content: Collaborations and brand deals where you promote a product or service.
- Affiliate marketing: Earning commissions by promoting other companies’ products.
Naturally, there’s no one-size-fits-all answer as to what qualifies. HMRC, the tax people, will decide eligibility based on several factors. Here’s what you need to demonstrate:
- Originality and Skill: Your content should showcase your unique talent, knowledge, or creativity. This could be anything from gaming skills to comedic timing to informative tutorials.
- Organisation and Risk: You need to be able to prove you’re running a business, not just a hobby. This includes demonstrating a level of organisation (e.g., consistent upload schedule, content planning) and taking financial risks (e.g., investing in equipment, editing software).
- Income Fluctuation: Reserved trading income typically fluctuates with your effort. If your income is consistently high without significant changes in activity, it weakens your case.
Within all that, there are some specific hurdles that YouTubers might face:
- Reliance on Platform: YouTube can change algorithms or monetisation policies, impacting your income. How much control do you have over this?
- Passive Income Streams: If you have a large subscriber base and generate income through merchandise or memberships with minimal ongoing effort, it might not be considered “reserved trading.”
Knowing all that, how can you strengthen your case with HMRC?
- Diversify your income: While ad revenue is important, explore other income streams like sponsored content, affiliate marketing, or even selling digital products related to your niche. This demonstrates a more “business-like” approach.
- Document your process: Keep records of your content creation process, time invested, and any financial risks taken. This helps establish your YouTube channel as a genuine business venture.
And, most importantly … seek professional advice: Obviously, we’ll say this – because it’s true. You should consult a tax advisor specialising in the creative industry.
