Millions of Britons using social media could face huge fines under little-known tax rule

The warning comes as the content creator economy continues to grow, with more influencers and self-employed creators receiving free products, services and even holidays in exchange for exposure on their social channels.

While many view these gifts as perks of the job, experts say failing to declare them properly could result in fines that far outweigh the value of the items themselves.

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Lee Murphy, Managing Director of The Accountancy Partnership – specialist accountants for freelancers, influencers and the self-employed – explained that the rules depend on whether the recipient is expected to promote the product in return.

He said: “If you receive something for free and the brand doesn’t expect anything in return, it’s not taxable. It’s a bit like getting a present from your Grandmother; she gives it to you because she likes you, not because she wants a shoutout on Instagram.”

However, Mr Murphy warned that when there’s an expectation to post about the product or service, it becomes taxable income.

He continued: “If there’s an agreement that the creator will post the product or service on their social media to advertise it, then the value of the item or service is classed as income and must be declared to HMRC. It’s considered a form of payment, just not in monetary terms.”

Mr Murphy urged creators to determine whether something is a genuine gift or a promotional exchange before deciding how to handle it for tax purposes.

He said: “If the brand gives you something with absolutely no expectation of promotion of it, then it’s a genuine gift and not taxable. However, if you must first agree to posting about it, tagging the brand or featuring the product or service in any of your content, then it’ll be classed as business income.”

He also explained how to calculate what to declare: “HMRC expects influencers and content creators to declare the normal retail price of the item or service.

“If it’s on sale, you still need to declare the normal face-value price. For example, if you are given a £100 meal for free in exchange for talking about your experience at a restaurant, then you need to declare £100 as income in your accounts.”

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To stay compliant, creators are advised to keep accurate records of all gifted items and experiences, much like they would for cash payments or payslips.

These should then be included in their annual Self Assessment tax return. Mr Murphy added that creators can deduct certain business expenses to offset their tax bill.

He said: “If you incur costs to create the content, such as editing software, or transport to get to a restaurant or airport, then these may be deducted as a business expense to reduce your tax bill.”

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As more Britons turn to content creation for income, HMRC is stepping up monitoring of brand partnerships and influencer deals.

Mr Murphy warned that the line between genuine gifts and paid promotions is becoming increasingly blurred and that ignorance of the rules is no defence.

He said: “Influencers are businesses; some people do this as their full-time role. Even if the accounts start as hobbies, if you receive any type of gifted product in exchange for posting about it, then you need to treat it as income. It’s better to be honest with HMRC as the fines could outweigh what the gifted products would’ve been worth.”