Do streamers pay tax in the UK?

The pixel-perfect world of streaming is a hobby for many, but for savvy entrepreneurs, it can be a lucrative career. There's serious money to be made from advertising revenue, sponsorships, and subscriptions, and that's just the tip of the iceberg. If you're on the verge of making streaming your full-time job, you may be wondering if and when you need to pay tax. The answer is yes.

In the UK, streamers must pay income tax on their earnings once they exceed the tax-free personal allowance threshold. They must register as a business and declare their profit (minus certain allowable business expenses) via a self-assessment tax return to HMRC each year.

In this article, I'll take a more detailed look at taxes for streamers. For more tailored advice, book a call with Capture Accounting, specialist accountants for streamers, influencers and content creators.

Are streamers classed as self-employed in the UK?

The beauty of streaming is that it allows you to follow your passion, whether that be craft, art, lifestyle advice or online gaming, and be your own boss. Whether you're a part-time streamer or it's your full-time gig, if you're earning money from streaming, you are considered a self-employed person in the eyes of the taxman.

As a self-employed streamer, you will likely be operating as a sole trader. This just means you're running your business as an individual. While that means you get to keep all your profits after tax, you're personally responsible for any debts or losses your business incurs.

How do streamers make money?

Streaming offers many ways to generate income.

The following are all classed as taxable income and must be declared to HMRC:

1. Ad revenue: This is money earned from ads displayed on your streams.
   
   
2. Donations received and Twitch donations: Generous viewers often contribute to support their favourite streamers.
   
   
3. Twitch affiliate system: As a Twitch affiliate or partner, you can earn a share of the revenue from any Twitch-sold ads playing on your streams.
   
   
4. Tournament winnings and prize money: If you compete in gaming tournaments, any money won is considered taxable income.
   
   
5. Other foreign currency income sources: If you receive payments in other foreign currency, this, too, should be reported on your tax return.

Understanding the UK tax system

While nobody likes paying tax, it's a legal obligation and helps the government fund public services and infrastructure. UK tax law can seem daunting, but it's fairly straightforward once you know the basics.

What taxes does a streamer pay in the UK?

If you are operating as a sole trader, you pay income tax on your earnings via self-assessment. You will also be charged National Insurance (more on this below). If your profits reach the threshold of £90,000, then you must also register for VAT.

Should you choose to register your business as a limited company in the future, you will be liable for Corporation Tax. However, you may still have to pay income tax via self-assessment on any other income other than your company salary.

National Insurance and streamers

As a self-employed streamer, you also have to pay National Insurance on your taxable income once it exceeds the threshold. Another tax, yes, but your National Insurance contributions are essential as they build your entitlement to certain state benefits, like the State Pension and Maternity Allowance.

Deductions and allowable expenses

While the amount of tax you pay may seem a bit dispiriting, the UK tax system does allow you to claim tax relief on expenses. You can deduct allowable expenses from your total income, which reduces your taxable income, leading to a smaller tax bill.

As a streamer, these expenses could include travel expenses for attending gaming conventions, equipment and gear, software, subscriptions and office costs.

To claim expenses, you need to keep a detailed record of all receipts and maintain a clear log of when, where, and why the expense was incurred. The important rule to remember is that allowable expenses are those that are solely for the use of your business.

When and how do streamers pay tax?

• When?: The tax year in the UK runs from April 6th of one year to April 5th of the following year. The deadline for submitting your income tax return and paying any tax owed is typically January 31st after the end of the tax year.
  
  
• How?: Once you register with HMRC as self-employed, you should keep records of your income and expenses. Each year, you must complete a tax return using HMRC's online platform and provide details of those income and expenses.

How is income tax calculated?

You only pay tax on the portion of your income that is above the annual personal allowance of £12,750. Your total taxable income (i.e. your profits after expenses are deducted) dictates which tax band you belong to and how much tax you have to pay.

Income Tax Bands 2023-4:

• Up to £12,570 - 0%
• Basic rate - £12,571 to £50,270 - 20%
• Higher rate - £50,271 to £125,140 - 40%
• Additional rate - over £125,140 - 45%

Once you put the details of your income and expenses into the online self-assessment system, it will calculate your tax bill.

As an example:

• Total income: £40,000
• Expenses: £8,000
• Taxable income: £32,000
• Less personal allowance of £12,570 = £19,430
• Taxed at basic rate: £19,430 x 20% = £3,886

When should a streamer register for tax?

If you're earning in excess of £1,000 per year from streaming, you should register with HMRC for tax purposes. However, it's not until your income reaches the tax-free allowance (currently £12,570) that you start to pay tax. But you will still be required to submit a tax return each year, even if you don't owe anything.

For more information about when a hobby becomes a business, check out our blog.

What if I have a full-time job and stream as a side hustle?

If streaming is your side gig and you have a full-time job, you still need to declare the income from streaming. This will be added to your total income for the year, possibly pushing you into the higher rate tax band.

What happens if you fail to declare your streaming income?

If HMRC suspects you are earning income that you haven't declared, they can conduct an investigation into your financial affairs. This can result in large fines and penalties.

Similarly, filing accurate and timely tax returns is of utmost importance. If you make a mistake or miss the deadline, you're likely to land yourself with a fine. How much depends on whether HMRC deems the mistake to be deliberate or genuine.

So it’s essential to stay ahead and be totally transparent.

Can streamers form a Limited Company?

Streamers may choose to set up as a limited company, having started off as a sole trader. They effectively become an employee of their own company and attain limited liability status, i.e. they are not personally liable for the business debts.

This setup can be more tax efficient, especially for streamers who are in the higher earner brackets for income tax. For example, as a company director, you can choose to pay yourself a small salary and take the rest of your income as dividends (a share of the profits). That way, you save on both income tax and National Insurance contributions.

If you are considering a move to a limited company, it's important to get accounting advice to understand the tax rules and your new legal obligations as a company director.

Organising your finances

Getting to grips with your finances is essential for preparing to pay tax. If you don't keep regular records, you will have a nightmare of a job when it comes to pulling it together for your income tax return.

One essential tip is to have a separate bank account for your streaming income. Mixing your personal and business finances can cause unnecessary confusion when it's time to fill out your tax return.

Next up, consider using cloud accounting software like Xero. This can streamline your record-keeping process, and many tools are tailored for self-employed individuals, making it much easier to track your income and expenses and calculate your tax liabilities well in advance.

Don't overlook the benefit of a tax professional, either. They can provide tax advice, help you organise your finances, and ensure that you are making the most of any tax allowances and reliefs available to you.

Capture Accounting, for example, offers financial services tailored to content creators and influencers. We can provide valuable accounting advice and take the burden of managing taxes off your shoulders.

Get specialist tax advice from Capture Accounting

Understanding the finer details of the UK tax system can be challenging. That's where Capture Accounting comes in. Our expert team is dedicated to helping streamers with their unique tax needs. 

Book a call with us to ensure your financial game is as strong as your online game.

Stream on and prosper, and remember – with the right knowledge and expert guidance, tax doesn’t have to be a game-ender!

Frequently asked questions about UK taxes for streamers

Do streamers pay taxes on donations?

Absolutely. In the UK, streamers need to pay tax on donations or tips received by dedicated subscribers. They're akin to performance fees.

Do streamers need to register for Making Tax Digital?

If your income from streaming surpasses the VAT threshold, you’ll need to register for Making Tax Digital and keep digital records of your transactions using compatible software.

Making Tax Digital will also come into effect for income tax in 2026 and for Corporation Tax at a future, as yet undisclosed, date. Connect with Capture Accounting for advice on how to be compliant.