OnlyFans Creators and HMRC Letters

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Are you or have you been an OnlyFans content creator? Have you received a letter from HMRC about undisclosed income? If you have, read on, and we’ll cover everything a content producer needs to know about taxes when making money on the OnlyFans network, and what to do if you haven’t disclosed your income and you received a letter about this from HMRC.

OnlyFans Background

As you probably know, with OnlyFans, providers of online material can get paid directly by their “fans” who subscribe to their content. Additionally to monthly subscriptions, you can also provide a pay-per-view feature and accept tips as payment.

‍Adult content, which became the site’s primary focus, especially during lockdown, is what most people think of when they think of OnlyFans. But additionally, there are creator categories for artists, chefs, and famous people like DJ Khaled and Cardi B. They are all producing paywall content.

‍The lockdowns of 2020 and 2021 were a major factor in OnlyFans’ growth since they made the site popular not just with visitors but also with producers who realised they could use it to make a (in some cases substantial) side or primary income. The easily overlooked issues of creator finances and tax are raised by the growing number of creators who are all making money from a new format. Let’s look at it.

‍What is an OnlyFans Creator?

A creator on OnlyFans is someone who uses the platform to make money from their career. YouTubers can discover that they make more money from fans directly than via the platform. Or Instagram models might earn more consistently from fans than from businesses using them in advertisements. Or, if you’re working extremely hard, maybe you’re doing all three.

‍You can submit pictures, text, and videos as an OnlyFans creator, and fans can follow you for a cost of your choosing.

‍The goal is to provide premium content that keeps users returning to the site since they can’t get it elsewhere. Additionally, because OnlyFans has fewer limits, a lot of the content is more explicit, making it unavailable to fans on other social media platforms. Anyone can create a page that is either free or paid, and followers can then pay to access premium material.

‍How to create content for OnlyFans

It’s a simple and free process to create a profile on the platform. Additionally, no contract of any type is required of you or your supporters. You should be aware that you must be 18 or older to register an account due to the adult material.‍

You must enter your email address, set a password, and give OnlyFans your ID (a security measure to prevent minors from using the platform) and bank information in order to be able to receive payments from your subscribers.‍

The second step involves selecting the subscription fee that customers will have to pay in order to access any of your content. If you’re not sure yet, don’t worry—you can always alter it later.‍ Although Onlyfans has minimum and maximum monthly amounts you can charge for your subscription.

‍You can also choose to make material available for free, granting fans access without a temporary paywall. You can still make money even in this situation by using other features, including pay-per-view ones and others.

‍‍Some producers, according to Influencer Marketing Hub, make more money from tips than from subscriptions. Although the platform’s main revenue stream is its subscription service, the amount of money producers get via tips is not made public.

‍Keep in mind that OnlyFans retains 20% of each user’s transaction when setting your rate. For instance, you would receive £16 for every £20 transaction.‍

Nevertheless, if you’re looking to gain a following, it could be worthwhile to think about what a reasonable cost would be. Due of the large number of creators in the market, you must also be somewhat constant in your content production if you want to gain subscribers.

Types of OnlyFans Income

OnlyFans creators can have multiple income sources, such as tips, subscriptions, pay-per-view content, merchandising, and brand partnerships.

See our resource: Navigating OnlyFans Income: A Guide for UK Creators

Do I pay taxes on my OnlyFans earnings?

Everything here is based on your earnings from OnlyFans (and outside OnlyFans) and applies to Creators resident for tax in the UK.

‍You don’t need to take any action if your annual OnlyFans income was less than £1,000. You are not required to pay income tax if you make £1,000 per year through websites like OnlyFans, according to HMRC.

If you worked with OnlyFans and made more than £1,000 a year, you must file a tax return. You may not necessarily have to pay taxes as a result of this. It simply means that HMRC wants to learn more about your circumstances in case you start making more money in the future.‍

If you earn more than £12,570 (2022/23) throughout the tax year, as with all self-made income, you’ll be required to pay tax on your income.‍ You must still pay taxes if you run OnlyFans as a side hustle.

Income Tax bands

0% of your earnings are taxed (you made between £0 and £12,570)
20% of your income (you’ve made between £12,571 and £50,270) is the Basic rate.
40% of earnings (you made between £50,271 and £150,000) is the Higher rate.
45% of earnings over £150,000 is the Upper rate.

‍Should I form a limited company?

It may be worth forming a company if you start paying that higher tax rate. As opposed to you paying income tax of 40% or more, your company will now pay corporation tax of only 19% on your profits. Additional taxes may apply when you extract profits from your company.

It may be worthwhile to stay a sole trader/proprietor/self-employed if you’re on the basic rate in order to save money and avoid the extra paperwork and expenses associated with forming a limited company.

‍Self-Assessment and Income Tax

You must submit a self-assessment tax return each year. Your payment consists of your freelance tax bill on your business income less operating costs. ‍

The typical deadline for submitting your self-assessment is the 31st of January if you’re submitting it online and the 31st of October if you’re posting it.

OnlyFans VAT

If you are a self-employed taxpayer in the UK or a business owner with a taxable income turnover of £85,000 or more, you almost certainly need to register for VAT. Our accountants can assist you in determining your eligibility for VAT, registering for VAT on your behalf, and maximising your profit savings through VAT claims due to the complexity of the UK VAT system.

Once you have a VAT number, notifying Fenix/OnlyFans is simple. To update your online account data and create a VAT statement each month, they merely need your VAT registration number. This is located in your account on the OnlyFans website, and you can submit it directly to us.

Value Added Tax (VAT): What is it?

Value Added Tax, or VAT, is a tax levied on almost all supplied products and services. With VAT, consumers are supposed to pay a tax depending on the value of the goods they purchase. Because VAT rates are based on percentages, the consumer pays more the more expensive the item is. In the UK, the standard rate is 20%.

‍When do I, as an OnlyFans Creator, need to register for VAT?

You must register for VAT only if:

  • Over £85,000 of your self-employment income, including OnlyFans, was earned over the past year (the VAT threshold)
  • You anticipate earning more than £85,000 during the next 30 days.

Regardless of the aforementioned, you must register if all of the following are true:

  • You are not located in the UK.
  • Your company is located outside of the UK.
  • You supply any products or services to the UK (or expect to in the next 30 days)

Even if the aforementioned conditions are not met, you can still register for VAT voluntarily. The main advantage of registering for VAT is that you may claim back the VAT you paid on items you purchase for your business, which enables you to save up to 20% on items like cameras and props that you use for your business.

‍While this can help you save some money, it also means that you will have to provide HMRC 20% of every transaction.

‍How is VAT handled by OnlyFans?

OnlyFans pays HMRC all VAT it receives in full. This procedure was just recently adopted by OnlyFans to safeguard the 80/20 revenue share between Creators and OnlyFans. The 80/20 earnings split is guaranteed regardless of where the Creator or Fan is located.

‍Whether you are registered for VAT and how much VAT you must pay to HMRC are covered here.

‍If you’re not registered for VAT

You don’t need to take any action, provided your annual income is less than £85,000. OnlyFans will take care of collecting VAT on your sales for you.

‍OnlyFans is responsible for collecting VAT for unregistered creators beginning of July 1st, 2020.

‍‍Here is an illustration of how VAT functions if you aren’t registered to help you clear up any confusion:

OnlyFans will automatically add 20% VAT to your subscription pricing if you wish to charge £10 for it. This implies that your subscribers will pay £12 (your pricing plus £2 for VAT) for your subscription.‍

Following this, OnlyFans gives you your share, which is still 80% of your set price (£8), but it keeps its cut (20% of your set price = £2) and the VAT (£2), which will then be paid directly to HMRC.

‍If you’re VAT registered:

The procedure is a bit trickier to comprehend if you are registered for VAT.

‍In this instance, you and OnlyFans are each responsible for paying a different sum of VAT to HRMC. However, the platform will collect the full amount of VAT paid by your fans and then pay you each month for your portion of the VAT in addition to your regular revenue. Then, you’ll have to physically submit this sum to HMRC.

‍‍If you are registered, this is an illustration of how VAT operates:

OnlyFans will automatically add 20% VAT to your subscription pricing if you wish to charge £10 for it. This implies that your subscribers will shell out £12 (your pricing plus £2 for VAT) for your subscription.

‍Following this, OnlyFans gives you your cut, which is still 80% of your specified price (£8), as well as your portion of the VAT (20% of £8 is £1.60), which you must remit to HMRC. However, OnlyFans keeps its cut (20% of your set price equals £2) and its portion of the VAT, which is equal to 20% of its earnings (20% of £2 equals £0.40), which will be delivered straight to HMRC.

‍In the OnlyFans Bank area, they request that you provide your valid VAT number and confirm acceptance of the self-billing agreement if you are already registered.

‍After that, some security checks will be done by the platform before any VAT payments are sent to you. You must send an email to vat@onlyfans.com with proof of filing your VAT return in order to get it paid. This is to ensure that HMRC has been notified of the VAT on your OnlyFans revenues. Once these tests have been completed, you are ready to ask the platform for VAT payments.

‍You must go to VAT documents section under “Statements” in order to make VAT invoices. All that’s left to do is send the invoices you’ve already made using the “Add Documents” option.

‍To make it easier for you to transfer the necessary amount to HMRC, OnlyFans will pay you your earnings (80% of fans’ payments) and the VAT in two separate instalments.‍ Additionally, the platform will give you a VAT statement that explains the sum and that you can use to finish your VAT return and pay the correct sum to HMRC.‍

‍As an OnlyFans Creator, what expenses am I allowed?

Depending on the content you produce, you’ll have different operating expenses as a creator. As long as these charges qualify as allowable expenses, you may deduct them from your taxable income.

‍Thus, if you make £40,000 and deduct £8,000 in costs, your taxable profits for the year would only be £38,000 in this case.

Be aware that you cannot also deduct expenses if you use the £1,000 tax-free trade allowance.

‍‍You might incur costs for a content creator for the following:

  • a lapbook computer
  • image and video editing programs
  • a camera
  • a smart phone
  • Lighting Materials you use in your content
  • Transportation if your work involves travel
  • Props
  • If you work from home, a portion of your rent, phone, broadband, and electricity bills can be claimed.‍
  • Lighting accessories
  • Equipment
  • Gym fee
  • Beauty treatments
  • Clothing
  • Airbnb used for filming
  • Travel
  • Office supplies
  • Advertising
  • Accountancy fees
  • Computer costs.

HMRC Contractual Disclosure Facility

The Contractual Disclosure Facility is the framework through which HMRC conducts significant fraud investigations. HMRC utilises this facility in other ways besides this, though.

It is occasionally forgotten or not known that the Contractual Disclosure Facility can also be used by someone who wants to update their affairs voluntarily while receiving protection from legal action. Your shortcomings can be disclosed to HMRC with the assistance of our specialists, who can also go over your best options.

You will be shielded from criminal prosecution for the tax shortcomings that you expose if you voluntarily disclose them to HMRC and agree to make things right by signing up for the Contractual Disclosure Facility. If you discover that you have not paid the tax when you should have, this alone can be a tremendous relief and lessen the concern.

Why disclose?

There are numerous reasons for wanting to inform HMRC of inaccuracies. When a client finally gets their tax afairs in order it is a weight lifted off their shoulders. We take great satisfaction in being here to assist you in a completely non-judgemental manner because we recognise that facing up to any wrongdoing, especially to a tax authority like HMRC, can be a very stressful time.

Due to the seriousness of such a disclosure, we advise you to get in touch with us before starting any communications with HMRC so that our knowledgeable HMRC-handling Accountants can provide you the best guidance on how to proceed.

We have years of expertise dealing with disclosures made through the Contractual Disclosure Facility as well as helping clients make such disclosures. We can provide you with thorough guidance throughout the process by listening to your situation and discussing it with our experts in a non-judgmental environment.

Additionally, HMRC runs campaigns that allow you to report specific mistakes in exchange for frequently preferential treatment when it comes to paying off the remaining tax debts. The team at Mercian Accountants are in a good position to help with such disclosures because we stay current on such efforts.

Please do seek guidance early on, even if you do not ultimately require our services. Please do not proceed without first receiving advice from experts with the necessary experience, if you are thinking about making a voluntary disclosure.

We offer free initial consultations because we want to be certain that we can help you before you commit to our services.

Do you need assistance telling HMRC something?

Do you need help disclosing information to HMRC? Please get in touch with us as soon as you can so that we can make sure you take the appropriate precautions to ensure that any conversation is accurate, full, and most importantly, does not adversely affect any subsequent encounters.

Contact us today to schedule a free consultation.

OnlyFans Tax Accountants

We have acted for many OnlyFans content creators who needed qualified, experienced Tax Accountants to assist them with their tax matters. We excel at ensuring that you are as tax efficient as you can be, which means you will pay the least amount of tax while abiding by the regulations. We know how to best help you comply with your obligations when it comes to filing your tax returns with HMRC.

How we assist OnlyFans Creators

You create, we do the accounts and taxes. We are aware of the challenges involved in continuing to produce outstanding material for your followers. While we handle the stress and bother of your tax matters, our services ensure that you remain productive.

Our Accountants have years of combined experience dealing with HMRC, making us highly qualified to handle all of your tax matters while you continue to grow and expand your audience.

Services we offer:

  • HMRC Disclosures
  • Letters and checks from HMRC
  • Filing Tax Returns
  • Tax planning

How can Mercian Accountants help?

We worry about bookkeeping, accounts, and tax returns, so you may focus more on expanding your business. Get in touch today.

About Graham

Accountant specialising in tax, property, and estate planning. A regular speaker at landlord, property Investor, and later life planning events.

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