Content creators have multiple income streams and ways to monetise. Financial planning is key to managing these unique revenue streams. We take a look at some of the challenges Youtubers, Tiktokers and other content creators may face in their accounting and how we can help.
Creating Revenue
Multiple income streams
As a content creator you have multiple revenue streams at your disposal, brand partnerships, advertising income, merchandise sales and sponsored posts. Each of these has its own terms and conditions.
For example brand partnerships can be very lucrative but often require a signed contract and specific deliverables. Ad revenue from YouTube is dependent on viewer engagement and ad rates, merchandise sales is direct income from your followers who buy your products.
Understanding these multiple income streams is key to stable income. Diversifying your revenue streams can also help you weather the ups and downs of any one area. Diversifying your income streams reduces the risk of being too dependent on one area. And tracking and managing your marketing expenses is crucial to overall profitability.
Monetisation
Monetisation is key to your career. Leverage multiple platforms and maximise each one. For example YouTube ads can be paired with channel memberships or Super Chat during live streams.
Influencers can use affiliate marketing by sharing product links with their audience. Each sale made through those links earns you a commission. Crowdfunding through platforms like Patreon allows supporters to contribute monthly and give you a steady income.
Offering exclusive content, paid subscriptions on Twitch or OnlyFans can also increase your earnings. These require a loyal audience and continuous value, from your side being consistent in your content and engaging with your audience is key to staying relevant.
Financial planning
Irregular income means you need to budget to cover your expenses during the quiet periods. Keeping track of your income and expenses will help you stay on top of things and prepared for tax time. Claiming expenses correctly is key to reducing tax and covering business costs.
Consider hiring an accountant who knows your industry to help with tax and financial advice. We can help set up the right business structure, manage the deductions and plan for future investments.
Saving a portion of your income for savings and retirement planning is just as important. By doing so you can secure your future and be prepared for any changes in your career.
Accounting for creators
Managing your finances as a content creator is important. It means keeping accurate records and on top of tax and VAT regulations.
Bookkeeping basics
Organised financial records are the foundation of accounting. Logging your income and expenses regularly will help you stay on top of your financial situation. To make this easier consider using spreadsheets or accounting software. And opening a business bank account is key to managing your finances as it will keep your personal and business expenses separate and give you clearer financial visibility.
Create categories for your expenses:
- Equipment: Cameras, microphones, lighting
- Software: Editing programs, subscription services
- Marketing: Advertising, paid promotions
Keep all receipts and invoices. This will make it easier to claim expenses on your tax returns.
Taxes and VAT
Tax is a big part of being a business. Know your tax responsibilities, income tax and National Insurance. If you earn over a certain amount you may need to register for VAT. Content creators earning income from social media platforms like YouTube and Instagram are also required to pay tax on their earnings.
Points to consider:
- Income tax: This is based on your income.
- VAT: If you earn over £90,000 you need to charge VAT on services.
Hiring an accountant can help you with this. They can do your tax returns and make sure everything is compliant.
Content creators challenges
Content creators face many specific challenges with financial management, irregular income and all the business expenses that come with content creation. Seeking tax advice is key to navigating the tax rules, not paying too much tax and being compliant and maximising earnings.
Managing irregular income
Income for content creators can be unpredictable, with big fluctuations from month to month making budgeting and saving hard. To manage this consider setting aside a portion of your income during high earning months and creating a separate savings account. You should also track all revenue sources, ad revenue, sponsorships, merchandise sales to have a clear financial overview and plan for the future.
Having a financial buffer will protect you during the quiet periods. Using accounting software to monitor your cashflow regularly will also help. This will give you reports that will show you which months are profitable and which aren’t.
Tax planning is important. Many content creators don’t save for tax and then get into trouble later. Set aside a percentage of your income for tax each month to avoid surprises.
Tax planning and compliance for influencers
Tax returns
As an influencer you need to file tax returns with HMRC to be tax compliant. Make sure you report all your income from all channels, YouTube, Instagram, TikTok and other platforms. Keep detailed records of income and expenses, receipts and invoices. Claim allowable expenses like equipment costs and marketing expenses to reduce your taxable income.
Completing and filing self assessment tax returns correctly is key to claiming all your expenses and avoiding penalties. Tracking income and expenses regularly will make this easier. Using accounting software will help you manage these records. This is where our specialist media accountants can help guide influencers through the tax return process to avoid mistakes and penalties.
Tax implications of brand deals and sponsorships
Brand deals and sponsorships can have a big impact on your tax situation as income from these is taxable and must be reported. Payments for brand deals often come in cash or kind, free products or services. Both cash payments and the fair market value of goods and services received must be included in your taxable income.
Keep contracts and communication with brands so you can account for all payments accurately. If you receive gifts or perks, document them properly. Seek advice from an accountant to understand how these deals affect your tax and to make sure you claim the right amount. And don’t overpay tax by getting specialist accounting advice which will help you navigate the tax minefield and maximise your profits.
Business expenses
As we mentioned earlier, content creators have many business expenses, equipment, software, marketing, travel. Managing these costs can be complicated but keeping detailed records is key. Using accounting software will make this easier by allowing you to categorise expenses, so you can see where your money is going and stay on top of your finances.
Knowing what expenses are tax deductible will save you money. Being tax efficient and maximising deductions is key. Seek an accountant who knows the content creation industry and they will help you maximise your deductions and be compliant.
Review your expenses regularly and you’ll find areas to cut costs. This will make your business more profitable. Having a budget for business expenses will give you a better understanding of your finances.
Business model & structure
Building a business model can help content creators plan for long term growth. Creators can start as a self employed or set up as a limited company. Both options have pros and cons for managing income and revenue streams.
Self employed creator
When starting out as a self employed creator it’s essential to track your income and expenses carefully. Using accounting software can help you monitor cash flow. Creating a budget is key to planning for future investments and managing business expenses. Filing a self assessment tax return is also a key responsibility for influencers and content creators to ensure compliance and avoid penalties.
Think about your revenue streams. Diversify by earning from multiple sources like ad revenue, sponsored content and merchandise. These will give you stability and increase your income.
Tax planning is also important. Save some of your earnings for tax payments as self employed individuals are taxed higher so you need to be prepared.
Limited company
Setting up a limited company might be a better option as your business grows. This will protect your personal assets as liability is limited to your business. Registering as a limited company requires more paperwork but can give you tax benefits. You can pay yourself a salary and take dividends and potentially reduce your tax bill.
Keep business accounts separate from personal accounts to keep personal and business finances separate. This will help you manage profits and re invest in your business. Consider hiring an accountant to help with more complex financial tasks like annual accounts and compliance. This will save you time and keep your finances in order.
Knowing the best options for you individual situation can take time which could otherwise be used to create more content and focus on your business. Here is where our specialists at Cottons can help get in touch with us today to discuss how we can help. You can also find more information on the services which may be relevant to your agency on our Media Accountants page.
