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Millions of people who use social media are being warned of a potential HM Revenue and Customs ( HMRC ) tax fine. New research from business management platform Tide has revealed that the rise of the content creator economy is helping millions of Brits turn their passions into profit, with the average social media earner now earning £1,223 a year. However, as more creators transform side hustles into thriving small businesses online, with the help of social media, many may be unaware of HMRC’s £1,000 trading allowance. It means they could unintentionally miss out on staying fully compliant as their ventures grow. Platforms like TikTok , X, and YouTube provide anyone with the opportunity to earn additional income. This could be achieved through promoting products available on the TikTok Shop, brand collaborations, or monetising high-performing content. The new research has found that four in ten (42%) social media users aged 18 and over have received money or free gifts in return for their posts. The average annual financial gain for this activity is £1,223, with a fifth (21%) of those who receive income for their content making over the £1,000 HMRC tax-free allowance on trading income. However, despite the legal requirement to file a self-assessment tax return if any additional earnings, including the value of gifted items, total more than £1,000 in a single year, just 52% of social media users say they are aware of this requirement. Only 44% of those who generate income from their content report having filed a self-assessment with HMRC. With penalties starting at £100 for missing the self-assessment filing deadline and increasing the longer the time passes, fines could total much more in a single year. These figures are most concerning for social media users aged 18 to 24 years old, as just 36% of them have filed a self-assessment with HMRC, despite more than half (55%) making a financial gain from their social media activity - the highest of any age group surveyed. Late submission of your tax returns could lead to the following: You may need to report any gifts you received on your tax return if you: earn more than £1,000 from influencing activities during the tax year, receive gifts worth over £50, or receive gifts in return for promoting services or products on social media. Although receiving free items might seem like a perk of being an influencer, HMRC views it differently. If a brand gives you something and wants you to promote it back, that gift is considered a type of payment, which means you have to pay tax on it. For instance, across one year, if you get: These amount to £430 in gifted value. If you also earned £800 in cash for another collaboration, your total income from influencing would be £430 (gifts) plus £800 (cash), totalling £1,230. Since this exceeds the £1,000 trading allowance, you would need to register as self-employed and declare it on your tax return. It's essential to recognise that not every free item constitutes income. For example, if a brand gives you a small gift, like a £50 candle, and you don't have to post about it, it's usually just a nice gift, and you don't have to pay taxes on it. Additionally, if you acquire other low-cost items (less than £50) without needing to promote them, you typically don't need to report those either. Heather Cobb, UK Managing Director at Tide, warns social media users that they could be at risk of penalties if they’re not aware of the rules. She said: "It’s great that TikTok, Instagram and other social platforms have opened up new ways for people to add to their income, and what might start as a bit of extra pocket money can quickly spiral into a serious side hustle. “Most people won’t treat this as a legitimate business venture at first, so it can be easy to lose track of exactly how much has been made over the course of a year. Especially for those who receive gifted items in return for social media promotion, as the value of these items also counts towards the yearly £1,000 allowance. Unknowingly going over this can result in a costly penalty. "This can range from a ‘failure to notify’ penalty to late return and payment penalties. As these penalties are often based on a percentage of the tax owed, they can amount to substantial sums for millions of creators to cover. "Our advice is to keep track of what you earn from the very first payment, and Tide makes it easy to open a separate business account for each business you run. Tools such as Tide Accounting also make it easy to track earnings and expenses. That way, you’ll be able to understand whether you’re over the allowance and need to tell HMRC, as well as monitor the growth of your new side hustle." Megan Paul, content creator and founder of Gel by Megan , based in Warwickshire, said: "What started out as me posting photos of my nails on Instagram as a creative outlet alongside my 'day job' in the civil service, quickly grew to thousands of followers, brand partnerships, sponsored posts and now my own training academy. "I took the leap to being self-employed four years ago, and my social media earnings have definitely helped me on my way. Taxes and self-assessments may feel scary, but most areas have thriving small business communities that you can lean on for advice, while modern business management platforms take a lot of stress out of the admin and organisation of your finances. "I would urge anyone making additional income from a passion project or content creation to not just view it as that little thing you do on the side, but to figure out whether it’s something you could take more seriously, and turn it into doing something you love full time."
