Research to understand Social Media Content Creators

Question 1

Glossary

Accepted Answer

Table 1: Glossary

Term	Definition
Digital asset	Virtual tokens with a real monetary value, often represented as animated emojis or stickers and sent to SMCCs in appreciation or support for their content. Most social media platforms (defined below) have their own form of digital asset, which must be purchased with real money and used within the platform. Once a SMCC accumulates a certain amount of digital assets, they can convert them into real money. Typically, only SMCCs enrolled in the platform’s affiliate or partner program (see 5.1.1) are eligible to receive digital assets.
Followers	Individuals who ‘follow’ the activities of a SMCC on a social media site or application, by which they receive notifications or updates in their own social media feed when the SMCC posts new activity.
Going viral	When social media content ‘goes viral’, it is viewed and shared rapidly and widely across a social media platform, or the internet, within a short period of time.
Grid post	Typical to visual-focussed platforms such as Instagram, grid posts are a visual arrangement of image and video posts in a grid, typically a 3x3 format. On Instagram, they are usually the first content displayed on an individual’s or brand’s profile.
Live stream	The act of broadcasting video or audio content to social media immediately as it is recorded, allowing followers to view or listen to the content in real time.
Media kit	A collection of materials compiled by a SMCC and sent to other brands to encourage potential collaborations. Typically, it includes information about the SMCC’s social media demographic, past follower engagement metrics and contact information.
Macro content creator	A SMCC with a follower count between 100,000 and 1,000,000.
Micro content creator	A SMCC with a follower count between 10,000 and 100,000.
Nano content creator	A SMCC with a follower count of less than 10,000.
Organic content	Content posted to social media without any form of paid promotion, relying instead on natural reach and viewer engagement to build momentum.
Paid content	Content posted to social media with paid promotion, to increase the reach and level of viewer engagement it receives.
Social media platform	A website or application that enables users to create and share content and engage with the content of other users. Audience interaction is a core function of social media platforms – as opposed to other platforms for creating and sharing content that have light, or no audience engagement functions (for example, traditional blog sites or audio streaming platforms).
Subscribers	A function of some social media platforms (defined above) that operate as an alternative, or addition, to the typical follower format (defined above). Depending on the platform, subscription may be free or paid. Paid subscription usually confers access to exclusive subscriber-only content or other perks outside of the social media platform.

Question 2

1. Executive summary

Accepted Answer

Overview of the research and aims

Social media and the sharing of content through digital networks and communities is an area of the economy that is quickly evolving. The ways in which social media content can be monetised are diversifying and, increasingly, being a social media content creator (SMCC) is seen as a viable self-employment route. As the number of people seeking to make money through content creation increases, HMRC required a more detailed understanding of how SMCCs understand their profession and the different methods they may use for earning income. HMRC commissioned the National Centre for Social Research (NatCen) to carry out qualitative research into how SMCCs refer to themselves and describe what they do, their tax knowledge and attitudes, and how HMRC can best engage SMCCs to help them get their tax right.

Methodology

The research involved 34 in-depth interviews with individuals who created original content on social media platforms for an audience beyond their personal network. They had also earned money or non-monetary benefits through doing so in the 12 months prior to fieldwork. The interviews used a topic guide to explore SMCCs’ understanding of their activities, tax knowledge and attitudes, and needs for further tax guidance. As little was known about the SMCC population, quotas were set against only one primary criteria of income level. While the report presents the views of those interviewed, these are expected to reflect the range and diversity of views within the SMCC population.

Key findings

How can SMCCs be identified?

SMCCs were involved in a broad range of sectors and across a wide variety of social media platforms. Their content ranged from general interest content that spanned a number of subjects, to those that catered to niche interests or a specific target audience. The type of content being posted generally consisted of a mix of ‘organic’ content (that is, natural or authentic content that is unpaid, though it may still be monetised in other ways), and ‘paid’ content (such as posts promoting particular products or brands). The level of earnings being generated through SMCC also fell across a wide spectrum, from those only receiving low value non-monetary benefits to those earning around £60,000 per year. Notably, the industry consisted of individuals with very different ambitions for their SMCC activities, including:

those for whom earnings were secondary to the enjoyment they gained from their content creation, they had no specific interest in growing their income as they wanted their SMCC activities to remain a fun pastime
those who wanted to increase their income or had interest in doing so in the future but lacked the time and capacity to pursue SMCC in a greater way due to other commitments (such as other employment and caring responsibilities)
those who were actively pursuing SMCC as their main source of income: they were growing their viewer engagement and earnings through investing more time and resources into their activities

Across income levels and sectors, ‘content creator’ was widely felt to be the most appropriate label to describe their activities. However, there was a group of low earning SMCCs for whom the term ‘content creator’ did not resonate. Instead, they recommended that HMRC should refer more specifically to activities that might be of relevance (such as receiving gifts from brands in exchange for a social media post). SMCCs also referred to themselves using terms that related to the specific platforms they used or type of content they created, such as ‘food blogger’ or ‘gamer’.

How do SMCCs understand their income generating activities?

SMCCs’ understanding of their income generating activities varied depending on their level of income and their intentions or ambitions for their SMCC activities. Among those whose main intention was to make social connections and share their interests with others, these activities were seen as part of their ‘hobby’. This group tended to include those earning less than or slightly over £1,000 per year. They perceived the money earned through their activities as ‘spending money’ or ‘pocket money’, money to supplement savings or to reinvest in their hobby.

Another group was motivated by the potential for their social media activities to make them money. This included those who had held this intention from the outset, as well as those for whom making money had become their main ambition sometime after they had started posting content (usually trigged by approaches from brands). This group tended to include those earning close to or more than £12,500 per year. These individuals saw their activities as a ‘business’ and their earnings as ‘income’, regardless of whether it was supplementary to a work salary or their sole source of earnings.

Earnings were drawn from a wide range of sources, but typically included money paid directly through the platforms themselves (such as advertising revenue and subscriptions), from brands (as fees in exchange for promotional content), or from fan donations. A substantial proportion of earnings were also made up of brand gifts, including products, services, or experiences. However, SMCCs tended not to automatically consider these part of their income as, in general, they could not be used to pay their living expenses.

How do SMCCs understand their tax obligations?

SMCCs’ views and attitudes towards their tax obligations fell into 4 categories:

Higher income and high tax engagement

This group tended to be earning close to or above £12,500 per year and actively sought information or guidance about potential liabilities. Across the group, levels of confidence and independence around dealing with their taxes varied greatly. This ranged from those who were highly self-reliant in managing their taxes, to those who were entirely reliant on an accountant.

Mid to higher income and low tax engagement

This group was earning between £1,000 and £12,500 per year or above £12,500 per year and had not undertaken meaningful research on their tax obligations. The group was divided between those who feared they were getting their tax wrong, and others who had misplaced confidence that their SMCC activities could not yet have triggered any tax obligations. For those in the latter category, their approach to their taxes was related to a general lack of financial literacy and a continued perception of their SMCC activities as a ‘hobby’ or ‘side hustle’.

Lower income and high tax engagement

This group were earning less than £1,000 per year It included those who had not yet taken any action on earnings from their SMCC activities (such as completing a Self Assessment Tax Return) but were nevertheless informed and confident around dealing with taxes. Others had previously earned much more from their SMCC activities and retained knowledge that they had gained at that time.

Lower income and low tax engagement

This group consisted of those earning less than £1,000 per year. This group had not actively sought information about potential tax liabilities and had no meaningful sense of when they might need to start taking action on their SMCC earnings. Given this, there was a substantial risk that this group could get their taxes wrong as their earnings grew.

Among the low tax engagement groups, there was a need for general awareness raising (highlighting that it is their personal responsibility to meet their tax obligations) alongside general tax guidance (such as when to complete a Self Assessment Tax Return). Within the ‘higher income and high tax engagement’ group, those who still lacked confidence with their taxes were uncertain about how to report certain expenses or deal with earnings from a range of different income streams. However, confusion about whether and how to include gifts in taxable income was pervasive across all levels of experience and income levels. This included whether different types of gifts (that is, products, services and experiences) should be treated the same.

How can HMRC best engage SMCCs to get tax right?

SMCCs were asked about how HMRC could best provide information and guidance to help them get their taxes rights. 4 main factors for consideration when engaging SMCCs on their taxes were highlighted:

When information is received

Views on when tax guidance should be received, varied somewhat depending on the type of information being provided. General tax advice could be most helpfully targeted at SMCCs at an early stage in their monetisation journey. Specialised information on how to report expenses or earnings from a range of income streams would be more relevant to SMCCs who already had diversified income streams and thought of their activities as a ‘business’. However, there was confusion around how and when to consider gifts as taxable income. Given this, information about the need to declare the value of gifts and how to assign value was a priority for SMCCs across all levels of experience and income levels.

Source of the information

SMCCs identified 4 possible sources of tax information: HMRC themselves, the social media platforms, other SMCCs, and management agencies. Participants suggested the best approach would be for HMRC to work with creators and platforms to disseminate information. This would help ensure the information provided was perceived as credible but also easily accessible for SMCCs. SMCCs also suggested that management agencies working with creators should circulate information and reminders about potential tax obligations to their clients.

Format of information

SMCCs indicated a multi-pronged approach was best for engaging SMCCs. There was a widely held view that HMRC could best reach SMCCs by creating and sharing content on social media platforms using HMRC accounts, as those at an early stage in their monetisation journey were unlikely to seek out tax information themselves. However, SMCCs also wanted HMRC to offer a single location with comprehensive tax information that is regularly updated. For example, on the HMRC webpages. Direct contact by HMRC via email would be most likely to be engaged with, as it’s clearly relevant to the individual. However, direct emails may cause unnecessary worry in some instances.

Tone of information

Information should be easy to understand and not contain jargon. The tone should also be supportive but sufficiently authoritative to attract SMCC’s attention and not be ignored. Part of this involves ensuring information does not come across as generic (and therefore potentially irrelevant), but as directed at and tailored to the SMCC industry.

Question 3

2. Introduction

Accepted Answer

This report presents the findings of exploratory research commissioned by HMRC to provide an understanding of social media content creators and how they can be supported to get their tax right. Throughout the report, ‘SMCC’ is used, interchangeably, to refer to both social media content creation (posting original content to public social media audiences) and social media content creators (those whose SMCC earns them an income). To ensure compliance with the Market Research Society code of conduct and participant expectations, platform names have been redacted from this report. This also applies to other information which could be potentially identifying, such as a participants’ specific number of followers or specific content. To ensure readability, identifying information has been redacted and substituted with generic reference text (indicated by the use of square brackets).

2.1 Background to the research

Social media and the sharing of content through digital networks and communities is an area of the economy that is quickly evolving. The ways in which social media content can be monetised are diversifying and, increasingly, being a social media content creator (SMCC) is seen as a viable self-employment route.

As the number of people seeking to make money through content creation increases, HMRC required a more detailed understanding of how SMCCs understand their profession and the different methods they may use for earning income. HMRC commissioned the National Centre for Social Research (NatCen) to carry out qualitative research into how SMCCs describe themselves and what they do, their tax knowledge and attitudes, and how HMRC can best engage SMCCs to help them get their tax right.

2.2 Research aims and questions

The research aimed to provide an understanding of the following themes, including the extent to which they evolve as the SMCC journey changes (for instance, as income increases or declines):

The nature of SMCC in general
- How can SMCCs be identified?
- What language do SMCCs use to identify themselves?
- How does this vary by platform and type of content?
The nature of income-generating SMCC
- Do SMCCs perceive their activities as a profession? (for instance, as self-employment or a business)
- How do SMCCs earn money and non-monetary benefits?
- What language do SMCCs use to describe income generation? *Do SMCCs perceive income generated through SMCC as income?
Tax awareness among SMCCs
- What do SMCCs know about their tax liabilities and from what sources?
- What attitudes do SMCCs have towards tax compliance?
- At what point and from where do SMCCs seek out support and advice in relation to their tax liabilities?
How SMCCs can be supported to get their tax right
- What is the best way to contact and communicate with SMCCs?

2.3 Methodology

The research involved 34 in-depth interviews with SMCCs whose content creation had earned them money or non-monetary benefits in the 12 months prior to the fieldwork.

2.3.1 Sample

The research adopted a purposive sample design. To be eligible, participants needed to have regularly posted original content on social media for an audience beyond their personal network and to have earned money doing so in the 12 months prior to the interview. As little was known about the SMCC population prior to recruitment, quotas were set against only one primary criteria of income level. The income bands were chosen to reflect the earnings thresholds at which different tax obligations arise (see Table 2). A number of other secondary characteristics were monitored as recruitment progressed. These included age, gender, platforms used and forms of income (further detail is provided in Appendix A).

Table 2 Sampling criteria and quotas, and number of recruited participants per quota

Income level (in 12 months prior to the fieldwork)	Detail	Target quotas	Achieved quotas
Less than £1,000 per year	Those earning below £1,000 per year are not required to complete a Self Assessment Tax Return	10 to 12	11
More than £1,000 and less than £12,500 per year	Those earning above £1,000 per year are required to complete and submit a Self Assessment tax return and may have to pay tax on these earnings	10 to 12	13
More than £12,500 per year	£12,500 per year is the tax free Personal Allowance threshold above which individuals start paying tax on their income	10 to 12	10

2.3.2 Recruitment

Multiple approaches were used to recruit participants in each group:

The NatCen Panel: The NatCen Panel is a high-quality, random probability panel, NatCen Panellists identified as being potentially eligible were invited to the research by email
Direct recruitment: Desk research was used to identify eligible SMCCs, who were invited to the research by email or social media message
Snowballing: Participants were encouraged to forward information about the study to other SMCCs they knew, inviting them to take part in the research
HMRC sample: HMRC provided NatCen with a sample of customers where information in their tax returns indicated they were potentially eligible for the research, NatCen invited a selection of these customers to the research by telephone

2.3.3 Fieldwork

NatCen developed an interview topic guide in collaboration with HMRC which explored SMCCs’ understanding of their activities, tax knowledge and attitudes, and needs for further tax guidance. Interviews lasted up to 60 minutes and were conducted by telephone or video call. All participants received an £80 Love2Shop voucher as a thank you for taking part.

2.3.4 Analysis

NatCen’s framework approach was used to summarise the qualitative data on a case and theme basis. That is, findings from each interview were summarised in a single row and summaries from different interviews, that related to the same theme, were presented in the same column. This enabled analysis of key themes and how they varied across the dataset. While the report presents the views of those interviewed, these are expected to reflect the range and diversity of views within the SMCC population.

2.4 Report structure

This remainder of the report is structured as follows:

Chapter 3, The SMCC journey:

Summarises the main stages of becoming a SMCC through to making an income from content creation.

Chapter 4, How SMCCs understand their activities:

Explores how SMCCs described themselves and what they do, and how they gauged their growth and success.

Chapter 5, How SMCCs understand their income generating activities:

Explores how SMCCs generated income and how they understood this.

Chapter 6, How SMCCs understand their tax obligations:

Explores the awareness, understanding and views of tax obligations among SMCCs, as well as their confidence in dealing with their tax obligations.

Chapter 7, How to engage SMCCs on their taxes:

Explores what sources of information SMCCs drew on about their tax obligations and what support they would find useful for improving their understanding

Question 4

3. The SMCC journey

Accepted Answer

This section sets out an overview of the main stages in the SMCC journey, from an individual first starting out to becoming more established and growing their income. This is intended to help inform HMRC’s understanding of the best possible ways to provide information to SMCCs about their tax obligations.

3.1 How SMCCs first started out

Generally, participants had started content creation either to make social connections and share their interests with others, or to generate additional income from the outset. For those in the former group, monetisation was not initially intended. For them, the potential to monetise their content had come when brands first started approaching them about their posts.

The latter group had pursued monetisation from the beginning. This group included those who had been advised by others already in the industry that it could be lucrative. Intending to monetise from the outset influenced the types of posts and content that SMCCs pursued. This included choosing content that filled a perceived gap in the sector or was more likely to attract brand attention (for example, consistently featuring the same brand in their posts).

“I identified this issue that I wanted to address, I laser focused on that and made a whole, essentially, marketing campaign around it, and just really had fun with it.” (More than £12,500)

Although one group of SMCCs had been involved in the sector for at least 5 years, the COVID-19 pandemic and the lockdowns that followed were typically a starting point for the SMCC journey. As individuals lost jobs or were furloughed, they turned to SMCC as a way of passing time and honed their content and skills. Those who had been SMCCs before the pandemic noticed the sector becoming much more saturated at this time and found it harder to maintain their previous income levels.

3.2 How monetisation came about and grew

Typically, monetisation first started out with free gifts from brands. Brands usually reached out to SMCCs within the first 3 to 6 months of their journey. The number of an SMCC’s followers or subscribers at this stage varied depending on the platform, how specialised or niche their content was, and where they were located in the country (in some sectors, for example, it was easier to attract brand attention outside of London). Generally, follower levels on Instagram at this point varied between 1,000 and 10,000.

For those who had not previously intended to monetise their activities, this initial brand engagement sometimes triggered a change in aspirations towards using social media for income.

“…initially it was just for fun, then it was to make a bit more money before having to get a new full-time job” (More than £12,500)

Others did not progress beyond the gifting-giving stage and did not actively pursue monetisation any further. For this group, content creation remained a hobby only. Reasons for this included:

having another career or profession they were invested in
wanting to keep their SMCC activities as a fun outlet for their interests
being mindful of the level of work involved in content monetisation

For those who decided to pursue monetisation, it often took years before they realised any monetary benefits. Growing their earnings tended to involve gradually building followers and engagement, their reputation and relationships with brands. The approaches SMCCs used to build their income are expanded upon in section 5.1.3. However, there were examples of individuals having overnight success with their content going ‘viral’, which gave them instant access to monetisation pathways either through brands or the platforms themselves. These pathways are further expanded upon in section 5.1.1.

SMCCs tended not to pursue content creation as a business or primary form of income until monetisation was a regular occurrence. Further, SMCCs’ journeys were not always linear. Content creation could move from being a secondary to a primary source of income and back again over time as individuals’ priorities or lifestyles changed. These shifts were commensurate with the level of commitment and hard work inherent in making SMCC a viable alternative to salaried employment:

“Everyone has their high periods […] For me personally, I rode the wave and then I didn’t hold on to it very well. So for me, it slowly depleted over time and I came to a realisation this is not working, it’s just too hard.” (More than £1,000 but less than £12,500)

3.3 Aspirations for the future

Later in their journey, SMCCs’ aspirations fell into 4 main categories:

those who were actively keeping their income below the £1,000 per year threshold to avoid tax obligations
those for whom earnings were secondary to the enjoyment they gained from their content creation, they had no specific interest in growing their income as they wanted their SMCC activities to remain a fun pastime
those who wanted to increase their income or had interest in doing so in the future but lacked the time and capacity to pursue SMCC in a greater way due to other commitments (such as other employment or caring responsibilities)
those who were actively seeking to grow their engagement and income through investing more time and resources into their activities

SMCCs in this last group tended not to have a specific figure or goal in mind. It included individuals who were aspiring to make SMCC their main occupation. For those already earning above £12,500 per year, earning aspirations tended to focus on achieving a more stable or consistent income.

Question 5

4. How SMCCs understand their activities

Accepted Answer

This chapter explores how SMCCs understand their activities. This includes how they refer to themselves and describe what they do, and their key milestones or indicators of success and growth.

4.1 Understanding SMCC activities

SMCCs varied greatly in the subjects they covered, the platforms they used and the resources they dedicated to their social media activities.

4.1.1 Scope of their activities

Participants created content related to a range of categories or themes, including fashion and beauty, gaming, lifestyle and food, and were active across many different social media platforms. Platform choice was influenced by a number of considerations, including:

preferences of their target audience (considering age, gender, or likely interests)
the type of content they wanted to make (particularly those streaming live video game play and platforms that allowed for more text alongside posts)
the monetisation opportunities available (see more section 5.1.1)

SMCCs often had accounts across multiple platforms but usually had a ‘primary’ platform on which they focused their activities. Certain combinations of platforms were popular where content created for one could be reused on the other with ease.

Activities generally involved creating original content of various forms for their own social media feeds (including long and short form videos, static posts and live streams). However, a number of SMCCs were also beginning to make content to be used or re-used on brands’ feeds directly. SMCCs’ content ranged from general interest content that spanned a number of subjects, to those that catered to a niche interest or specific target audience. The type of content being posted varied greatly but generally consisted of a mix of ‘organic’ content (that is, natural or authentic content that is unpaid, though it may still be monetised in other ways), and ‘paid’ content (such as posts promoting particular products or brands).

Beyond the platforms themselves, SMCCs considered the inputs into their content to include various activities, such as attendance at events that helped to build their profile. These included Public Relations (PR) events (such as the launch of a new video game or product), networking events and ‘meetups’ with other SMCCs. In some instances, platforms themselves offered these networking opportunities:

“I get invited to stuff by [social media platform] and they celebrate their creators and provide a place for them all to network, whereas [other social media platforms] don’t really do that.” (More than £12,500)

4.1.2 Resources used

SMCCs also ranged in the amount of time and other resources they invested in their activities. In general, those earning more from their activities also invested more time and resource, but there were some variations by sector and type of content.

SMCCs earning less than or slightly above £1,000 per year might only spend a few hours a week creating social media content, whereas those earning close to, or above, £12,500 per year were devoting much more than this, sometimes committing to more than 50 hours a week. Filming and editing videos could be particularly time intensive, especially if needing to meet specific requirements of a brand or when aiming for a highly produced finish.

Those at less than £1,000 per year tended to use little more than a smart phone and editing software that was either free or required a small yearly subscription. However, those earning above £12,000 per year often invested in expensive media production hardware and software. Those within the gaming sector in particular encountered high upfront costs, including specialist PCs, gaming headsets, fast internet connections, recording and editing software, video games and subscriptions.

4.1.3 How progress is measured

There were a wide range of milestones referred to by SMCCs and considered markers of success. These milestones tended to fall into 2 categories: those that indicated SMCCs’ increasing popularity or relevance to their audience, and those that were related to content monetisation (although there was some overlap between the categories). The former included the first time a post went ‘viral’ or when they reached a certain threshold of followers (5,000 or 10,000). Milestones in the second category included:

the first time they were contacted by a brand
the first time they received a free gift in exchange for a post
the first time they were paid for creating social media content
the first time their content became eligible for monetisation on a specific platform (for detail see section 5.1.1)

Number of followers or subscribers was considered the typical benchmark of success recognised outside the industry. However, viewer engagement through, for example, comments, likes and shares was more sought after as an indicator of progress by SMCCs. Indicators of viewer engagement varied somewhat depending on the platform and type of content. SMCCs producing content for live consumption (for example streaming video game play) were less concerned with the number of overall views and focused more on concurrent viewership.

Engagement was seen as a more accurate metric of success, both in terms of earning potential and also the impact the content was having on the SMCC’s target audience. Brands tended to approach SMCCs based on their follower or subscriber counts, as this was the most readily available metric. However, others prioritised metrics of viewer engagement which would function as a more precise predictor of how successful a collaboration would be. For this reason, creators with a small following (fewer than 5,000) but highly loyal following still attracted brand interest.

4.2 How SMCCs describe themselves and their activities

To inform how HMRC can better reach and communicate with SMCCs, the research explored how creators understand their activities and the language they use to refer to themselves.

4.2.1 How they view their activities

SMCCs’ understanding of their activities varied depending on their income level and aspirations at the beginning of their content creation journey. Those earning less than or slightly above £1,000 per year, and who had started posting on social media to express their interests, tended to refer to their activities as a ‘hobby’. Others earning close to, or above, £12,500 per year tended to refer to them as a ‘business’. This was also true for those with lower earnings but with aspirations to make money through their activities from the outset. SMCCs across income levels and sectors were generally strongly motivated by a personal interest in the subjects they were creating content about, and so occasionally considered their activities to be simultaneously a hobby and a business:

“I’ve got a reasonably large following, and sometimes I get free products, and I get to work with big companies, and it is a cool little hobby for me. That’s what it is. It’s a hobby really, more than anything.” (More than £1,000 but less than £12,500)

4.2.2 How SMCCs describe themselves

Across income levels and sectors, ‘content creator’ was widely felt to be the most appropriate label. It was described as the accepted term across the industry and was felt to be an accurate description of what their activities involved. A ‘content creator’ was felt to be someone creative and actively involved in the various elements of making digital content to share online (including ideation, writing, filming, and editing).

However, there was a group of low earning SMCCs for whom the term ‘content creator’ did not resonate. For this group, the term was associated with a level of expertise or professionalism they did not relate to or the pursuit of income, which was not their intended goal. Instead, they recommended HMRC should refer more specifically to activities that might be of relevance (such as receiving gifts from brands in exchange for a social media post).

“…for the purposes of HMRC, they probably don’t want to lead with, ‘Are you a content creator?’ Well, they can but they can also say, ‘Have you ever been asked to promote an item or service, a product, something?’ Yes, unless you’re a big influencer […] people aren’t really going to think of themselves in that way […] if it’s kind of like something that happens occasionally, you probably wouldn’t describe yourself in that way.” (Less than £1,000)

In contrast to the term ‘content creator’, SMCCs did not associate themselves, or what they did, with the term ‘influencer’ and, in fact, disliked this description. Instead, ‘influencer’ was associated with high-profile public figures or celebrities. They felt the term did not reflect the amount of effort and creativity involved in being a ‘creator’. Others associated ‘influencers’ with content that was solely intended to persuade viewers to buy particular products (rather than motivated by genuine interest or enthusiasm) and saw these activities as dishonest.

“I feel ‘content creator’, when you explain it, people are a lot more on board. If you say ‘influencer’, I think the immediate association is out of touch, very, very wealthy, and that’s simply just not the case for most content creators.” (More than £12,500)

SMCCs also referred to themselves using terms that related to the specific platforms they used or type of content they created. Likewise, SMCCs also tended to refer to themselves in terms that related to their niche, such as ‘food blogger’, ‘gamer’ and ‘lifestyle vlogger’.

Question 6

5. How SMCCs understand their income generating activities

Accepted Answer

This chapter explores the level and nature of SMCCs’ earnings, their understanding of their earnings, and main ways of earning income through SMCC activities.

5.1 Approach to income generation

There was a wide variety of avenues through which individual SMCCs could monetise their content, with varying levels of formality or informality. Approaches to monetisation varied depending on individual SMCCs’ level of experience within the sector and ambitions around growing their earnings.

5.1.1 Income generating activities

Some avenues of monetisation were seen as more accessible than others for SMCCs with lower follower numbers or viewer engagement levels, while some were seen as more lucrative than others. This is expanded upon in the paragraphs below.

Gifts from brands

Gifting is a marketing strategy whereby a brand sends a free product or service to a SMCC with the intention that the SMCC will promote the product or brand in their content. With this, the brand aims to increase their sales through increased awareness and positive associations among the SMCC’s target audience. Receiving brand gifts was a common experience for SMCCs across sectors and income levels, and often the first way in which SMCCs ‘monetised’ their content.

The types of gifts varied by sector but included clothes, beauty products, computer equipment, codes to access computer games, free meals at restaurants, tickets to attend events, household appliances, and overnight stays. Among those interviewed there were no examples of longer holidays or very high value gifts, such as cars.

Brands tended to email about potential gifts beforehand, although there were also examples of gifts being sent without prior agreement if an SMCC’s address was on a PR list. Sometimes SMCCs were given a choice of gift from a range of items. At other times gifts were given in combination with an affiliate link or code (for further detail see later paragraph). Through an ‘affiliate programme’, individuals could access further gifts based on traffic to their individual code or link.

There was some disagreement among SMCCs on whether gifts, such as merchandise or products, could be sold on or were ‘press samples’ not for resale. SMCCs tended to ‘re-gift’ these items or donate them to charity, but others sold them via online selling platforms.

Paid brand sponsorships and User Generated Content (UGC)

Paid brand sponsorships involved a brand paying the content creator to reach and engage their target audience, for example through:

product placement or sponsored posts and advertisements that integrate a brand’s product into the SMCC’s content
dedicated posts, that is, creating content specifically focussed on the brand or products
encouraging audience engagement with the brand through contests or giveaways sponsored by the brand

This was a common form of monetisation across SMCC sectors, but more typical amongst those earning between £1,000 and £12,500 per year and those earning over £12,500 per year. Sponsorships tended to involve one-off marketing campaigns but could also involve longer term projects (for example, for 6 months). SMCCs also described websites that facilitated these arrangements. SMCCs could sign up to these sites and can get selected for a campaign:

“I get a notification from this company if they release a new campaign. So I’ll just go on and apply for it and then wait to see if I get selected.” (Less than £1,000)

This way of monetising content was much more accessible for SMCCs just starting out and with lower follower numbers than some of the other avenues for generating income, such as affiliate and partner programmes (see further detail in later paragraph).

User Generated Content (UCG) involves a brand paying an SMCC to create content showcasing a brand’s product or service that looks and feels like genuine customer interaction. This content is normally posted directly onto the brand’s social media accounts (rather than the SMCC’s own accounts). A number of SMCCs interviewed were moving into or seeking out UCG contracts with brands. This was described as a natural progression or next step following standard brand sponsorship work, particularly for those wanting to grow their income.

Affiliate codes or links

Affiliate codes or links involve the inclusion of unique affiliate URLs or codes within posts, which enable brands to attribute product sales or web traffic to the content creator. Payment to the content creator is performance based, that is, commission is proportionate to the volume of sales or brand engagement their content generates.

This mode of monetisation was more common on some platforms than others. On those platforms where affiliate codes or links were commonly used, SMCCs across sectors had in general earned through this stream at some point in their monetisation journey. As well as direct arrangements with individual brands, SMCCs also described sites that allowed them to copy and paste affiliate links from various different brands to use in their content.

Although SMCCs suggested these were a good source of income for others, there was a widely held view that affiliate links were of limited value. The level of commission earned per sale was very low (typically between 1p and 10p per item sold). Therefore, products needed to be sold in large volumes to generate a significant amount of income. SMCCs explained that viewers also tended not to use the links but instead visit the brand’s site separately.

“I would say, pretty much everybody that I speak to would never bother using an affiliate code, because they’re pointless. Nobody ever uses the links to buy them, and they often say you need to earn a certain amount before you can cash out what you’ve earnt.” (More than £1,000 but less than £12,500)

Payment directly through platforms

Payment directly through platforms includes any form of monetisation where payments are made directly from the social media platform itself to the content creator. For SMCCs with higher follower numbers or viewer engagement and who had become established before the sector became more saturated during the COVID-19 pandemic, avenues directly through the platforms themselves could be lucrative. However, for nano (less than 10,000 followers) and micro (less than 50,000 followers) SMCCs these avenues were seen as being of limited value due to the commission taken by the platforms or level of viewer engagement needed to make a meaningful monetary amount.

Participants had experienced a wide variety of income streams through the platforms which are explored in more detail in the following paragraphs. Given the number of monetisation avenues available and differences between the platforms, those interviewed were not always clear on eligibility criteria or fee percentages taken by different platforms.

Affiliate or partner programmes

SMCCs needed to meet certain requirements such as a threshold of subscribers or number of hours of videos viewed to gain access to platforms’ affiliate or partner programmes. Through entry to these programmes, SMCCs unlocked various modes of monetisation. These modes included:

earning a proportion of viewers platform subscription fees
a membership function whereby viewers could become members and pay monthly fees for exclusive content
earning advertising revenue from advertisements included before or during their videos
vehicles through which to receive fan donations (for further detail see later paragraph)
access to shopping features whereby viewers could purchase a creator’s own or featured products within the platform itself, this was done through links or icons within videos or live streams or on posts

Sometimes features could be accessed individually (without affiliate status) or they had additional eligibility requirements so access to monetisation streams was tiered. Typically, platforms took substantial commissions on fan donations and subscriptions. Participants suggested they tended to receive less than 50% of what fans spent. This was seen as unfair by some:

“Let’s say you spent £10 on [a platform’s virtual currency], and spent all of that on gifting different things to people on [the platform]. They might only see like, £4-something worth of the £10 that you spent…. People think that they’re gifting the equivalent of what they’ve spent, but that’s not the case at all. I think that’s a bit cheeky.” (Less than £1,000)

Creator Funds

As with the affiliate or partner programmes, SMCCs had to meet certain criteria to gain entry to creator funds. They would then receive a portion of a fund allocated by the platform to support creators. The amount received was based on, for example, their number of views or level of viewer engagement.

Fan donations

Fan donations involve receiving money or a virtual item that carries monetary value, sent by fans as tokens of appreciation or support. To facilitate this, most social media platforms have created their own virtual currencies and digital assets (typically displayed as animated emojis). Sometimes viewers purchase digital assets in return for virtual services such as having their comments highlighted or promoted in comment sections or live chats. These digital assets can then be exchanged by the creator for a monetary payment.

In practice, the process of converting a fan’s initial donation into a final payment to the creator could be quite complex. For example, a fan might first have to purchase the platform’s virtual currency in order to buy virtual gifts for a favoured creator. These gifts then needed to be converted into a different digital asset by the creator before being exchanged for cash. Not all digital assets had a fixed value but instead could fluctuate based on rules set by the platform. Creators only received payouts when their accumulated donations reached a certain threshold (for example, £50).

Other income streams

To avoid high commission levels on the platforms themselves, creators sometimes directed fans to provide donations outside of the platforms. Alternatively, fans could buy items for the creator from a wish list on an external site linked to their profile.

5.1.2 Use of formal contracts and obligations

While the conditions of payment directly through the platforms were set by the individual communities’ policies, when operating outside the platforms, SMCCs often had to determine their terms themselves. The approaches taken around gifts and brand sponsorships are detailed below.

Gifts

Gifts tended to be offered informally by email and did not involve signed contracts, although SMCCs had varied experiences of the circumstances in which gifts were given. At times brands expected promotional activity in return, with some being more prescriptive in their expectations than others (for example, specifying the type of post and timescales). At other times, the gifts came without obligations.

Brands were less likely to set obligations for more established SMCCs unless they were prepared to pay them a fee. They were more forthcoming in setting terms and conditions for smaller creators who needed to build their profiles and brand relationships. This was sometimes also true for larger brands and more established creators.

“Sometimes I’ll do free promotions, because you want to maintain a relationship with the brand for paid opportunities in the future. If they send you stuff, it is definitely because they want you to promote it. They won’t say it explicitly, because then they’d have to pay you.” (Less than £1,000)

Smaller brands without marketing budgets tended not to set expectations around promotional activity. In these instances, gift giving was based on an understanding of trust between the content creator and brand.

Paid brand sponsorships and UGC

Paid brand sponsorships and UGC contracts were subject to formal written contracts. These would be negotiated between the SMCC and the brand or PR agency, with key factors being the brand’s priorities for the campaign (for example, revenue or raising awareness), and the SMCC’s number of followers and viewer engagement.

“We discuss rates. I have my idea of what I should be charging at this point with that many followers and what I feel my time is worth…we negotiate via email. Once it’s agreed, we will sign a contract between me and the company, and then go forward with the work.” (More than £12,500)

Usually contracts included a ‘review period’ during which the brand approved what the SMCC had produced. In these circumstances, the SMCC simply issued an invoice for the work and was paid by the brand or PR agency by bank transfer.

These arrangements were seen as part of a general trend towards greater professionalism in the sector, with greater recognition that what SMCCs are doing is work and adding value for the brand (sometimes in place of a PR agency).

“There’s a lot of [web]pages now that encourage you to expect money because you’re doing work for them at the end of the day” (More than £1,000 but less than £12,500)

5.1.3 Approaches to increase income

Those who had been SMCCs for some time (5+ years) held the view that more ways of monetising content had become available over time and become easier for those with fewer followers or lower viewer engagement to gain access to. Earning a good level of income, however, had become harder:

“So essentially it’s easy to get on the monetary platform nowadays, but actually making good money out of it is a different story.” (More than £1,000 but less than £12,500)

Monetisation was also considered easier for those who had found a niche in the market, rather than posting generic beauty, fashion or lifestyle content which had become somewhat saturated. Opportunities to monetise also depended on whether the SMCC had gained visibility (and therefore appeal for brands) through gaining ‘celebrity’ status or having a post go ‘viral’.

Those actively seeking to increase their earnings, however, were doing so through a variety of approaches. These included:

Designing their content to increase engagement and followers on their platforms to attract more brand interest, for example, by targeting a specific audience

Decision-making was often informed by dashboards on the platforms themselves which allowed SMCCs to gauge when their content was most viewed. This led a creator, for example, to time their live streams for when teenagers got home from school.

Actively pursuing engagement with brands or PR companies.

Decision-making around which brands to approach was usually guided by their own personal interests and involved reaching out to brands or PR companies on social media or circulating their media kit with rate information. In some instances, they hired a management company or agent to do this on their behalf, who then typically took 20% commission on their earnings.

Other strategies included attending PR or networking events to build their personal brand and diversifying their content to use platforms with perceived better routes to making consistent income (particularly passive income through advertisements included before or during video content).

Those relying on SMCC for their main or sole income tended to prefer formal arrangements with brands through sponsorships or contracts to produce UGC. In this way, they were guaranteed a set rate, rather than being dependent on commission from sales (which was unreliable and could vary greatly). However, SMCCs were careful to balance advertising and PR content with organic posts, otherwise they risked losing followers:

“… If you are only posting paid ads and paid brand deals, then people will start to lose interest. So, you have to obviously talk about your life, and you have to still post about what you love, and be authentic and all those things.” (More than £12,500)

Those not seeking to increase their earnings were generally not actively pursuing brand contracts or entry into platforms’ monetisation pathways. They tended instead to be approached by brands with free gifts or received monetary donations directly from fans. Others were still earning based on prior content they had made or a reputation they had built when SMCC was a greater priority for them. This included, for example, being approached because of still being on various Public Relations lists.

5.2 Earnings through SMCC

Participants’ experiences of earning through SMCC varied greatly depending on their type of content and the length of time they had been creating content for.

5.2.1 How SMCCs understand their earnings

The amount that SMCCs reported earning lay along a wide spectrum, from low value non-monetary benefits only to around £60,000 per year.

Across the sample, SMCCs tended not to spontaneously include the value of gifts in estimations of their income or keep detailed records of gifts received and their values. For this reason, there was some uncertainty about their level of annual income and the accuracy of the estimates given during the research (when both monetary and non-monetary income was considered). Even those who included the value of gifts in tax returns did not generally consider these parts of their income, as they could not be used to pay their living costs. There were some exceptions to this, notably in the food sector, where vouchers to eat free at restaurants were used to cut down on grocery bills.

SMCCs’ understanding of their income generating activities varied depending on their level of income and their intentions or ambitions for their content creation activities. Those earning less than or slightly above £1,000 per year (particularly those who still saw their activities as a fun pastime) tended to describe money earned through their activities as ‘spending money’ or ‘pocket money’, money to supplement savings or to reinvest in their ‘hobby’. Those earning close to or more than £12,500 tended to see it as an ‘income’, regardless of whether it was supplementary to a work salary or their sole source of earnings.

5.2.2. Nature of earnings

SMCCs emphasised the fluctuating and inconsistent nature of their earnings from year to year, and even month to month. For this reason, those earning less than £1,000 per year or between £1,000 and £12,500 per year tended not to think about their earnings in terms of an annual income. Instead, they operated month-to-month. At these income levels, gifts appeared to make up a much greater proportion of SMCCs’ earnings. A SMCC earning between £1,000 and £12,500 per year, for example, suggested they earned only £500 per year in fees, but “thousands” in free meals at restaurants.

Earnings were not always commensurate with a creator’s following or popularity. A creator with 100k followers, for example, made only £2 to £20 per month through fan donations. Earning instead depended on the commercial appeal of the content. For an SMCC in the gaming sector, their income had fluctuated between £6,000 per year and £30,000 per year over the past 5 years, both increasing and decreasing.

Maintaining income was dependent on posting regularly and consistently, otherwise engagement and earnings could drop off quickly. Earnings were also highly dependent on a platform’s algorithm and changes to the requirements for entry into their creator funds or affiliate and partner programmes. For these reasons, relying on SMCC income for their primary or sole income was seen as demanding and highly risky by SMCCs:

“You know what is the harder part, that you depend on the platform. If we are talking about social media specifically […] they can have switches of algorithms […] That can change your reach, it can change who sees your content […] how many people are engaging with your content.” (More than £12,500)

Question 7

6. How SMCCs understand their tax obligations

Accepted Answer

This chapter explores SMCCs’ awareness of and views on their tax obligations and whether this varies by income or other characteristics. This chapter will also explore previous experiences of paying tax on SMCC income, including confidence dealing with taxes.

6.1 Views and attitudes towards tax liabilities

To better inform HMRC’s approach to communicating with SMCCs about their taxes, the research sought to understand SMCCs’ views and attitudes towards their tax obligations. This included the extent to which they actively sought information about their taxes and confidence dealing with their taxes.

SMCCs tended to fall into 4 groups: 1. higher income and high tax engagement 2. mid to higher income and low tax engagement 3. lower income and high tax engagement 4. lower income and low tax engagement

The following paragraphs describe these groups in more detail.

6.1.1 Higher income and high tax engagement

This group included those earning close to or above £12,500 per year. While they were engaged with their taxes, in that they had actively sought information or guidance about potential liabilities, their level of confidence and independence around dealing with their taxes varied greatly. It ranged from those who had never used an accountant and were highly confident and self-reliant in managing their taxes, to those who were entirely reliant on an accountant.

“I have an accountant who does all my taxes for me. I would never do them myself because I don’t know how to do them properly. Yes, that’s all outsourced to an accountant” (More than £12,500)

Others fell in between, in that they had prior experience with self-employment or knowledge passed on from friends or family members but nevertheless felt more comfortable using an accountant.

Triggers for undertaking research about tax liabilities or getting an accountant included the first time the SMCC:

set up a social media account (if monetisation was intended from the outset)
monetised social media content
undertook contracted work with a brand
completed a Self Assessment Tax Return

Those who were confident in managing their taxes themselves tended to have established an approach to this at an early stage in their SMCC journey and used the same approach throughout. This group included those who were already well informed about taxes when they first started out as an SMCC, either due to past self-employment experience, from education, or because a family member or friend was self-employed or an accountant.

“I was taught at uni, ‘If you’re going to sell your art, you need to keep track of everything. You need to have bookkeeping and expenses, and you need to declare it.’ I very much knew off the back of that the standard to follow” (More than £12,500)

Others had not had prior knowledge but felt confident after undertaking extensive research themselves.

Some of those who relied entirely on an accountant lacked confidence in their ability to understand their tax obligations and so had hired an accountant without attempting to educate themselves first. Others had attempted to undertake research but either struggled to find or understand the information and so were still not confident they could get their tax right.

6.1.2 Mid to higher income and low tax engagement

This group included individuals earning between £1,000 and £12,500 per year or over £12,500 per year. This group had not employed an accountant, often because they felt they could not justify the cost. They had also not undertaken any meaningful research on their tax liabilities. The group was divided between those who lacked confidence around dealing with their taxes and feared they were getting their tax wrong, and others who had a misplaced confidence that their SMCC activities could not yet have triggered any tax liabilities.

Among the former group were those who explained they could not find information about tax obligations that was accessible to them. This group included individuals who were considering approaching an accountant, as they were concerned about the consequences of not meeting any potential tax liabilities. Some were taking measures to mitigate the possibility of a back-dated tax bill, including setting aside a proportion of their SMCC earnings.

Those in the latter category tended to base their understanding of the thresholds for tax obligations and liabilities on assumptions. Their approach to their taxes seemed to be related to a general lack of financial literacy and a continued perception of their SMCC activities as a ‘hobby’ or ‘side hustle’ (rather than as a main source of income, a business or formally contracted work):

“I have never worried about it, purely because it’s not something that I do full-time […] for someone that’s making maybe a couple of hundred pounds extra a month, I don’t think that that should be of any interest to HMRC or anything else” (More than £1,000 but less than £12,500)

6.1.3 Lower income and high tax engagement

Participants in this group earned less than £1,000 per year. This included those who had not yet had to take any action on earnings from their SMCC activities (such as completing a Self Assessment Tax Return) but were nevertheless highly engaged and confident around dealing with taxes (in some cases due to separate self-employment experiences). Others had previously earned much more from their SMCC activities and retained the understanding and awareness of taxes that they had gained at this time. This group had a good understanding of the threshold at which tax obligations would be triggered.

6.1.4 Lower income and low tax engagement

This group consisted of those earning less than £1,000 per year. This group had not actively sought information about potential tax liabilities and therefore had no meaningful sense of when they might need to start taking action on their SMCC earnings. Given this, there was a substantial risk that this group could get their taxes wrong as their earnings grew. One view expressed was that they would choose to avoid looking into their tax obligations if their earnings increased, as they did not want to pay tax. This would only change if they thought HMRC could ‘crack down’ on them, which they thought unlikely due to past experiences:

“I rented out my car, and I made, in 2 years, about £15,000. No one has asked me at all. Do I pay tax on that? No, but if someone said to me that someone is cracking down and […] checking PayPal transactions or something, maybe I’d be a bit more wary, but no one else was paying it that I knew amongst my peers either, so there was no pressure really.” (Less than £1,000)

6.2 Knowledge, understanding and management

The following paragraphs explore SMCCs knowledge and understanding of their tax obligations and approaches to recording their earning, as well as the main factors that influenced this (including income level).

6.2.1 Knowledge and understanding of tax obligations

Interview discussions centred around SMCCs awareness and understanding of when they needed to complete a Self Assessment Tax Return, when they needed to start paying tax on their SMCC income and whether gifts were considered part of their taxable income.

Relevant tax thresholds

Among engaged SMCCs within both the lower and higher income groups, there was generally a good understanding of the earnings thresholds above which they needed to complete a Self Assessment Tax Return or start paying taxes. Nevertheless, among those earning between £1,000 and £12,500 per year. there was some confusion around how the tax free Personal Allowance threshold operated. This included whether, for example, income from their SMCC activities should be added to or considered separately from income from an employment salary. Participants who used an accountant relied on them to know and comply with any requirements on their behalf.

Those in the low tax engagement groups either completely lacked awareness of these thresholds or were confused about their implications. It was suggested that information about SMCCs’ tax obligations was either not readily available or not easy to understand. It should be noted that the fieldwork for this study took place before the launch of HMRC’s Tax Help for Hustles campaign.

“There’s just loads of rumours. Some people are saying it’s when you make about £12,000 or it’s when you make about £1,000. It’s just really confusing. There’s no actual figure to know, okay, when do I start paying tax? […] A lot of people like me are lost.” (More than £1,000 but less than £12,500)

SMCCs in these groups suggested that they would only need to change their approach to their taxes if one or more of the following were true:

their earnings increased: some participants expressed a specific figure, for example, £1,000 per month, while others did not have a particular threshold in mind
they started earning as much as other SMCCs in their sector
they became ‘successful’
they received formally contracted work
SMCC became their full-time job

Notably, some of these milestones were subjective in nature.

Reporting value of gifts received

Across the 4 categories explored in section 6.1, there was no consistent pattern in participants’ awareness and understanding of whether gifts should be counted towards taxable income. Even among some of those that were highly engaged, there was confusion about if, and when, to include the value of gifts. There was a view that even accountants were not always clear on this. This confusion draws into question whether SMCCs were always accurately reporting their income levels and meeting the tax obligations attached to different earnings thresholds. Across the sample, SMCCs’ understanding of the rules around gifts aligned with one of the following:

they were very clear of the fact (and always had been) that SMCCs must tell HMRC about any gifts they receive
they found out that gifts count towards taxable income at a late stage in their SMCC journey, for example, after their accountant informed them or after finding out through a separate line of work
they were aware that gifts can count towards taxable income, but were of the opinion that this only applied under certain circumstances
they were unsure whether gifts counted as taxable income, either they had heard this before and assumed it to be false or had never even considered this before being asked during the research interview
they firmly believed that gifts cannot count towards taxable income

For those who held the view that gifts were only included in certain circumstances, these circumstances included if the gift:

exceeded a certain value (values given included £50 and £1,000)
could be resold (for example ‘experiences’, such as meals out, would not count)
was provided as part of obligated or formally contracted work, or
was used by the SMCC (those disposed of or given away would not count)

Participants either held no view about whether gifts should count towards taxable income or believed they should not. Some expressed incredulity at the idea. Those who believed that gifts should not count towards taxable income explained that SMCCs rarely receive gifts that can be used to pay for or offset their financial needs. This might be, for example, because the gifts do not hold a high value or are not of personal use to the SMCC. Sometimes the opposite was true, but the work put into promoting the gift offset or outweighed the value of the gift. Another view was that companies should be responsible for any tax associated with gifts they provide, not the SMCC receiving the gift.

6.2.2 Managing earnings

SMCCs’ management of their earnings varied depending on their level of income, type of income streams, and engagement around their tax obligations.

Recording keeping among highly engaged SMCCs

Whether with or without the support of an accountant, SMCCs in the ‘higher income and high tax engagement’ group tended to manage their recordkeeping in a highly systematic way. Triggers for adopting a more systematic approach had included:

starting to receive large or more regular payments or gifts
undertaking formally contracted work for the first time
having to complete a Self Assessment Tax Return for the first time

The main approach to recordkeeping was to maintain a spreadsheet where participants recorded their SMCC earnings, expenses and – where they were aware of the obligation to report it – the retail value of gifts they had received. Other participants undertook a similar recordkeeping approach but using dedicated software or by hand.

Maintaining consistent records was notably more challenging for those with highly diversified income streams. This influenced how regularly SMCCs updated their records. Those who relied on a smaller number of sources for their income tended to update their records once, at the end of the tax year. This was particularly true where this income was easily traceable via digital transactions (for example, an SMCC who received all their income directly from one platform). In contrast, participants with more diversified transactions found it more convenient to update their records on an ongoing basis.

In some instances, SMCCs had taken additional measures to manage their taxes. Measures included increasing their expenses to keep their income beneath the tax free Personal Allowance threshold or ensuring that their total monetary income always exceeded the value of gifts received:

“I know of SMCCs who receive a lot of gifts but don’t receive sponsorships. Therefore, all their money is locked up in an item that they can’t pull money out of to pay the tax with. I’m very careful about that, so I make sure that I’m always earning more than I accept in gifts” (More than £12,500)

Recording keeping among those with low engagement

Those in the ‘mid to higher income and low tax engagement’ group tended not to record their earnings at all or tended not to do so in a consistent way. There were some examples of these individuals keeping an informal list of their activities, such as noting down gifts received. In preparation for the research, participants had reviewed bank account statements, invoices for work completed or records on the platforms themselves to estimate their annual income.

Generally, those in the ‘lower income and high tax engagement’ and ‘lower income and low tax engagement’ groups did not keep records of their earnings. This was considered disproportionate for the SMCC activities they were undertaking. Given the very limited number of income generating activities they had undertaken in the last year, they were confident of being under the £1,000 per year. threshold for the research. Nevertheless, within the ‘lower income and high tax engagement’ group, particularly cautious individuals were recording their earnings and gifts to some degree.

Question 8

7. How to engage SMCCs on their taxes

Accepted Answer

This chapter explores SMCCs’ current sources of information on taxes and what support they would find useful in improving their understanding. It begins by exploring the main sources of tax information SMCCs relied on and what information social media platforms provided.

7.1 Sources of information about tax obligations

7.1.1 Main sources of tax information and guidance

The sources SMCCs relied on for tax information varied depending on their level of income and engagement with their taxes.

Those in the highly engaged groups often relied on multiple sources and distrusted information from non-experts. This was particularly so for those in the higher income group who viewed their SMCC activities as a business. They tended to rely either on advice from accountants, other self-employed individuals or the GOV.UK website itself. Official sources of information were viewed as more credible and trustworthy.

Those in the low tax engagement groups had relied on sources of information from individuals in a similar circumstance. This included information on internet forums or from other content creators and friends:

“[Within an internet forum] There are people who are generally in the same position as you or gone through what you’re currently struggling with, so they would have done the research already and then let you know” (Less than £1,000).

However, the findings indicate that relying on these sources tended to lead to gaps and inaccuracies in understanding.

Across the sample, SMCCs tended not to look to SM platforms themselves for tax guidance, as the information provided was limited. SMCCs described a number of ways in which the platforms approached the potential tax obligations of creators:

Prompting creators to complete a form that declared they would pay tax in the UK. This was asked, for example, when SMCCs first signed up to certain platforms’ facilities for monetising content through advertising revenue
Providing links to relevant pages of the GOV.UK website. While these were commonly provided, SMCCs tended not to engage with them. An SMCC talking about the information available on one platform explained:

“There was a very small thing about tax information. I don’t know, I’ve never clicked it so I don’t really know what it entails, but there is a button hidden there, but it’s not very obvious.” (Less than £1,000)

Sending reminder emails to creators towards the end of the tax year that they may need to pay tax along with guidance on how to do this

7.2 Supporting SMCCs with their taxes

This section focuses on the support SMCCs felt they needed to improve their understanding of tax and what this support could look like to best engage creators.

7.2.1 What information or support is needed

The tax information that SMCCs needed varied depending on how much they earned from content creation, their income streams and their existing levels of confidence and knowledge in dealing with their taxes. Some SMCCs felt that they did not need any more information or support. This included those in the ‘higher income, high tax engagement’ group who had been SMCCs for a number of years, and so felt they understood their obligations fully. It also included individuals in the low tax engagement groups who felt confident they did not earn enough to trigger tax obligations. Nevertheless, gaps in their knowledge and understanding emerged through the research which are also reflected in the following paragraphs.

General tax advice and guidance

The research identified a need for general awareness raising among SMCCs, highlighting that it is their personal responsibility to find out about and meet their tax obligations. This was particularly true among the low tax engagement groups. It is likely to be especially challenging to encourage those who see their SMCC activities as a ‘hobby’ only to engage with this message.

Those in the low tax engagement groups also required general tax information, including:

when and how to submit a Self Assessment Tax Return
how to accurately record their earnings,
at what income level they could expect to start paying tax
the consequences of not meeting their tax obligations

Other more specific queries from these groups included whether SMCCs had to complete a Self Assessment Tax Return when or before their income exceeded the £1,000 per year. threshold, and whether multiple sources of income (for example, from SMCC and selling second hand clothes online) counted towards the same or separate Self Assessment Tax Return thresholds.

Specialised guidance tailored to SMCCs

SMCCs in the ‘higher income, high tax engagement’ group but who still lacked confidence in dealing with their taxes wanted more specific information tailored to SMCCs about how income from different sources should be dealt with. SMCCs who received their income regularly from one or 2 sources found tax guidance on the GOV.UK website to be sufficient for their needs. However, those with more diversified payment sources suggested it was lacking. A specific query, for example, included whether to state total income before or after management agency fees had been paid.

These creators also wanted more information about what they could claim as expenses, particularly in terms of domestic costs:

“The thing that really confuses a lot of people is how much they can claim because you’re working from home, because you’re using the internet, because you’re using the electricity here, how much can you claim as expense against the house normal bills”. (More than £1,000 but less than £12,500).

Going further, they suggested accountants could also benefit from additional guidance specific to the SMCC industry:

“I think that it would be good to try and educate accountants better as well because there have been times where my accountant and I have had to figure stuff out between us because the information just isn’t out there in a clear, concise way.” (More than £12,500)

When and how to include gifts in taxable income

As discussed in section 6.2.1, across the sample, there was confusion around whether or when to consider gifts part of taxable income. Guidance and information on this aspect was therefore particularly needed. Within this, creators were unsure whether all gifts, (for example, products, services and experiences) should be treated the same. They were also unsure how to assign a value to gifts in particular circumstances, including:

when no pricing information was provided alongside the gift
when SMCCs were given bespoke items
when they were given pre-release items or samples that were not featured on any websites where they could source the recommended retail price

7.2.2 Preferences for receiving this information or support

The following paragraphs explore the ways in which SMCCs would prefer to receive tax information. This includes who should provide the information, the format, the tone, and when the information should be provided.

Who should provide tax information

SMCCs identified 4 possible sources of tax information: HMRC themselves, the social media platforms, other SMCCs, or management agencies. SMCCs did not spontaneously identify any role for brands in disseminating tax information.

There was disagreement on the extent to which tax information should come directly from HMRC or be provided by platforms and creators. While tax information coming directly from HMRC was viewed as more credible and authoritative, SMCCs suggested information provided by other content creators or platforms would be easier to understand and more likely to be accessed by SMCCs. Participants therefore suggested the best approach would be for HMRC to work with creators and platforms to disseminate information:

“I feel like HMRC needs to work with them [SMCCs], and then they will be able to push it out in a more, push the information out in a more relaxed style that we can understand it”. (More than £1,000 but less than £12,500)

SMCCs also suggested that management agencies working with creators should circulate information and reminders about potential tax obligations to their clients. For those working with agencies, this would have the practical benefit of ensuring tax information reached SMCCs directly, as they had an existing relationship and frequent contact with these agents. Further, it was understood that information received from an agent would be taken ‘more seriously’ by these SMCCs than information through a platform or another creator.

Format of tax information

There was a widely held view that HMRC could best reach SMCCs through activities on social media platforms using HMRC accounts. This recognised that SMCCs, particularly those at an early stage in their journey or who still considered their activities to be a ‘hobby,’ were unlikely to seek out tax information themselves.

HMRC could use platforms’ tools to target advice at SMCCs, posting in a similar format to other content found on the platform, such as a picture slide show outlining a step-by-step guide on how and when to complete a Self Assessment Tax Return:

“The best advice for HMRC to reach people who are content creators is to become a content creator themselves. Obviously then they’ll reach loads of people because that’s where they’re all at” (More than £12,500)

However, SMCCs also wanted HMRC to offer a single location with comprehensive tax information that is regularly updated. Those who held this view welcomed a dedicated page on the GOV.UK website specifically tailored to SMCCs. This would complement social media posts by providing additional detail and allowing SMCCs to verify the posts’ content.

There was some disagreement on whether HMRC should directly contact SMCCs, for example, using email addresses listed on their social media profiles. Being directly contacted by HMRC could cause creators unnecessary worry that they were doing something wrong. However, SMCCs would be more likely to view and engage with information in this format:

“If you don’t follow them, you don’t necessarily see the content. You might, but think it’s not meant towards you. It’s generic. If I receive it in my inbox, it goes straight to me.” (More than £12,500)

Tone of tax information

Importantly, the information provided should be easy to understand and not contain jargon. While there was a group of highly engaged SMCCs who felt existing information was already sufficiently clear, others described it as confusing and overwhelming.

While SMCCs welcomed a supportive tone, they felt it also needed to be sufficiently authoritative to attract SMCCs’ attention and not be ignored. Phrases such as “did you know…?” were preferred over accusatory messaging which may panic recipients.

“They just have to word it in a way that people are going to take notice, but also not scare them. Because as soon as someone says something about tax, and you ain’t paying your tax, and then this is going to happen, then everyone just starts freaking” (More than £12,500)

When tax information should be received

SMCCs felt that general tax advice and guidance could be most helpfully targeted at SMCCs at an early stage in their monetisation journey. By intervening at this point, HMRC could help prevent individuals getting their taxes wrong as their income grows. Key intervention points included

when an SMCC first seeks fees from a brand for their work: this points to a possible role for brands in providing tax information
when an individual switches their social media account from a ‘personal’ to ‘business’ account
when an SMCC first receives a direct payment from a platform

SMCCs requiring more specialised information on how to report expenses or earnings from a range of income streams were more likely to seek this out themselves. It was therefore felt that this information should always be readily available on HMRC’s webpages and updated regularly.

As discussed above, gifts were often the first way in which SMCCs monetised their content and there was confusion around how and when to consider gifts as taxable income among SMCCs at all stages of their monetisation journey. Given this, information about the need to declare the value of gifts and how to assign value was relevant to SMCCs across all sectors, levels of experience and income levels.

Question 9

Appendix A: Achieved sample

Accepted Answer

Tables 3 to 8 display the number of participants who took part in this research and met each:

income level (which formed the only sampling criteria)
secondary sampling characteristic including, including age, gender, platforms used and forms of income source, number of followers, social media platforms used, theme of content, gender and age

While the other categories displayed are exhaustive, the social media platforms and themes of social media content displayed only include those monitored at recruitment. However, participants mentioned posting to a smaller number of additional platforms and content with a range of miscellaneous themes.

Table 3: The number of participants in the achieved sample, against the sampling criteria income level

Income level	Number of participants
Less than £1,000 per year	11
Between £1,000 per year and £12,500 per year	13
More than £12,500 per year	10

Table 4: The number of participants in the achieved sample, against the secondary sampling characteristic, income source

Income source	Number of participants
Sole income source	6
Primary income source	22
Secondary income source	6

Table 5: The number of participants in the achieved sample, against the secondary sampling characteristic, number of followers

Number of followers	Number of participants
Nano (up to 5,000)	7
Micro (between 5,001 and 30,000)	13
Macro (between 31,000 and 500,000)	12
Major (more than 500,001)	2

Table 6: The number of participants in the achieved sample, against the secondary sampling characteristic, theme of content

Theme of content	Number of participants
Beauty	15
Fashion	10
Gaming	9
Lifestyle	8
Food	6

Table 7: The number of participants in the achieved sample, against the secondary sampling characteristic, gender

Gender	Number of participants
Male	6
Female	28

Table 8: The number of participants in the achieved sample, against the secondary sampling characteristic, age

Age	Number of participants
25 to 34	22
35 to 44	8
45 to 54	4