Youtube Tax Guide

YouTube is an online video sharing and social media platform launched in 2005, by Steve Chen, Chad Hurley, and Jawed Karim. It is currently owned by Google, which bought it for $1.65 billion in 2006, only 10 months after its official launch. It boasts a second place in the most visited websites list, after Google Search. To date, YouTube counts over 2.6 billion monthly worldwide users, this means that 42.9% of all global internet users access YouTube monthly!

Even when it comes to subscriptions the number isn’t low. In fact, YouTube Premium (a paid subscription option for watching content without ads) and Music have together more than 50 million subscribers around the world.

In the beginning, YouTube generated revenue only from advertisements, but with Google’s ownership, it expanded into other paid content, such as movies and exclusive content. But not only, YouTube now offers the possibility to access its content from mobile apps, and network television, and to link it with other platforms.

Most content on YouTube is generated by individuals and comprehends music videos, video clips, news, short films, feature films, documentaries, audio recordings, movie trailers, teasers, live streams, vlogs, and more.

Since its foundation, YouTube has had an unprecedented social impact, influencing popular culture, internet trends, and creating multimillionaire celebrities.

We put together this guide to help you start your YouTube career, knowing everything, especially the forgotten bit about tax and expenses.

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How to become a YouTuber

You can easily open a YouTube channel for free either on the YouTube mobile app (that you’ll need to download) or directly from the YouTube website.

Note that to sign up on YouTube, you’ll need a Google account, that you can create directly during the registration process.

Once you have a Google account, you can sign up on YouTube, where you’ll be able to like or dislike videos, subscribe to other channels, and receive personalised recommendations based on your activity.

To open your YouTube channel, you’ll have to tap any action that requires a channel, such as the “Upload video” button, posting a comment, or creating a playlist. Here, if you don’t have a channel, you’ll see a prompt to create one. You’ll only need to insert your name and a picture if you like.

Job’s done! You’re now ready to start posting your videos.

Note that to post videos longer than 15 minutes, you’ll need to verify your channel. You can easily do this at youtube.com/verify. You’ll only be asked to select your country, choose whether you’d prefer to receive a phone call or a text message to verify your account, and enter your phone number. You’ll immediately receive a 6-digit code through a phone call or text, that you’ll need to insert on the verification page. You can now upload videos over 15 minutes, custom thumbnails, live streams, and content ID appeals.

We’ve also put together a small list of tips for starting your channel.

Get good equipment: having clear video and audio can increase the quality of your videos and set you apart from the other creators.
Plan your content and decide on a schedule: before starting your channel, you should have an idea about what kind of content you want to create. You should stick to a particular theme so that you can create your subscriber base, and also choose how often you’re planning to post videos.
Don’t be afraid to look for inspiration: you can find inspiration anywhere, even on other YouTube channels!
Optimise your video for SEO and search: you should choose titles that people are likely to look for while typing in the search bar. Make sure to include some keywords in it! You can also include relevant tags and keywords in the video description. This will help your video to be among the first results for correlated research.
Build a relationship with your viewers: engage with them, asking them to comment below your video and subscribe to your channel.
Don’t focus too much on negative comments: negativity isn’t good for creativity, just keep creating your content without thinking too much about this.
Decide a schedule and stick to it: decide how often you’re going to play and let your followers know
Share your channel everywhere you can

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How much can I make as a YouTuber?

This mainly depends on how many viewers you have and how many revenue streams you can have. To give you an idea, you can make on average between £2.50 and £4.10 per 1,000 views through advertisement. The more viewers and subscribers you have the higher your earnings.

However, note that around 96.6% ****of YouTube accounts have fewer than 10,000 subscribers and 84.2% of channels have fewer than 1,000. Therefore, it all depends on the amount of effort you put into it and your content. Just think that in 2021 Forbes reported YouTube top earners, and the first place earned $38 million (£33,037,000) in a year.

Let’s have a look at the different ways you can use to monetise on YouTube:

AdSense: this is another Google product that allows YouTubers to run ads on their channel and receive payments. On average you can earn between £0.01-£0.03 per view per ad. To set up your AdSense account, you need to meet some criteria:

you need to be at least 18 years old
you need to have an active Gmail account that isn’t linked to an AdSense account
your content must be original, of high quality, and result interesting to your audience
your content must not go against AdSense terms

The process to set up an account is quite straight forward. Just follow the step provided by YouTube here.

AdSense is one of the requirements to enter the YouTube Partner Program. Even if the company will advise you to set one up only after becoming a member, you can create it even before.

Start creating as a YouTube Partner: becoming a YouTube Partner allows you to monetise your videos in different ways. Note that you need to meet some requirements to become one:

Be in good standing with YouTube
Have 4,000 public watch hours in the last 12 months
Have at least 1,000 subscribers

Once you become eligible, YouTube will notify you and you’ll need to sign the Partner Program terms and create or add a Google AdSense account. After becoming a partner, you can start earning from YouTube Premium subscribers, ads, channel memberships, superchat and more.

Super Chat and Super Stickers: these ****are ways to connect with your fans during live chat. Specifically, these features allow them to stand out within live chat by letting them purchase highlighted chats and animated images. Your viewers will be able to buy Super Chats to highlight their messages within live chats. Moreover, they can purchase Super Stickers, which are digital or animated images that pop up in the live chat feed. These enable them to get pinned to the top of the chat for a set period of time.

The only criteria to use these features are:
your channel must be monetising
you have to be in an eligible location
live chat must be turned on
you need to be a YouTube Partner

If you meet these, you only need to go to studio.youtube.com and set them up under the monetisation section.

Channel membership: this feature lets the most loyal fans support you by joining your channel for a monthly membership fee in return for member-only benefits, such as badges, emojis, exclusive videos, and more.

To set this up, your channel must be eligible. Specifically:
have over 1000 subscribers
you need to be a YouTube Partner
you need to be 18+
be in an eligible country
your channel must not be for kids

If you’re eligible, just go on studio.youtube.com and set them up under the monetisation section. Here you’ll be asked to choose how many membership levels you want to have and the benefits that will be available for your members. You can create up to 5 levels and between 1 to 5 rewards for your members. Note that the benefit included in the lowest level must be present also in the higher ones and that you’ll be responsible to deliver them, so make sure they’re feasible.

You can price your level between £0.99 to £ 89.99.

Once you choose your pricing and benefits, your levels must be approved by YouTube before going live. This can take up to 1 day.

Note that you won’t be able to change your price once approved. You can remove levels but you’ll lose their members.

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Do I need to pay tax? And how do I pay tax?

This all depends on how much money you make with YouTube (and outside YouTube).

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If you earned less than £1,000 a year with YouTube you do not need to do anything. HMRC lets you earn £1,000 a year through platforms like YouTube without worrying about income tax.

If you earned more than £1,000 a year with YouTube, you need to submit a tax return. This doesn't necessarily mean you need to pay tax. It just means HMRC wants to know a little bit more about your situation in case you start earning more in the future.

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Specifically, as with any self-made income, you’ll need to pay tax on your income if you make over £12,570 in the tax year.

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If you’re creating videos on YouTube on the side then you’ll need to understand paying tax as a side hustle. You can read more about side hustles in our blog post here.

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If you’re going full-time creator mode then you’ll need to understand paying tax as self-employed. You can read more about going fully freelance in our blog post here.

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As you start out you’re more 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

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Don't forget that you'll also need to pay National Insurance on your income if you earn over £11,908 in a year.

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If you start hitting that higher rate of tax then it’s worth setting up as a limited company. This means you’ll pay corporation 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.

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Each year you need to fill out a self-assessment tax return. What you pay is your freelance tax bill minus the expenses of running your business. You can read more on how to complete your self-assessment tax return in this Earnr article.

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The usual cut-off date to complete your self-assessment is the 31st of January if you’re doing it online, and the 31st of October if you’re completing the form by post.

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What can I expense as a YouTuber?

As a creator, you’ll have various running costs depending on the work you do. You can deduct these costs from your taxable profit as long as they’re eligible expenses.

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So if you earn £50,000 and you claim £9,000 in expenses, you’d only be taxed on £41,000 for the year.

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Note that if you use the £1,000 tax-free trading allowance you won’t be able to claim expenses.

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You can read more on what the Government considers expenses here.

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For a video maker you might expense things like:

A laptop
Microphones and webcams
Lighting
Editing software
Transport and fuel if travel is involved
If you’re WFH then some of your rent, phone bill, broadband, and energy bills

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Be aware that if you use the same vehicle for traveling for work and for your own personal use then you’ll need to factor this in when any expenses are claimed. If you work out that you use your vehicle 40% of the time for personal use, then you would need to reduce any relevant vehicle running expenses by 40%. The same happens if you use your home as an office base, you should calculate which portion of your bills or phone usage can be counted as running expenses.

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How can Earnr help?

Earnr allows you to track your ingoings and outgoings over the course of the year, and automate your tax return. You can separate your business transactions from your personal ones, track your expenses and get a real-time tax estimate so you know whether or not you need to submit a tax return.

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Check it out here.

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