If you're a YouTube creator based in the UK and earning money through AdSense, sponsorships, or other monetised content, it’s important to understand where VAT (Value Added Tax) fits into the picture. Unlike income tax, which you pay on profits, VAT is a sales tax applied to the goods and services you supply. But does that apply to YouTube income? The answer depends on how much you earn and who is paying you.
Understanding VAT Thresholds
In the UK, you must register for VAT if your taxable turnover exceeds £90,000 in a 12-month rolling period (as of April 2024). Taxable turnover includes income from goods or services that would be subject to VAT if sold in the UK.
However, YouTube AdSense revenue is generally paid by Google Ireland Ltd, which makes this income outside the scope of UK VAT, but still relevant for registration purposes.
Is YouTube AdSense Income Subject to VAT?
Here’s the breakdown:
- AdSense (Google Ads): Technically, you’re supplying advertising services to Google Ireland. Since this is a business-to-business (B2B) transaction with a company outside the UK but inside the EU, it is considered a reverse charge service under VAT rules.
- You don’t charge VAT on this income, but it counts toward your VAT registration threshold.
- Once registered for VAT, you must apply the reverse charge on your VAT return (report it as both input and output tax, so it nets to zero).
What About Sponsorships, Merch Sales, or Brand Deals?
- Sponsorships from UK brands: If you receive money from UK companies for shout-outs or promotions, this is a VATable service if you’re registered.
- Sales of merch or digital products: If you sell directly to consumers (B2C), your income could be VATable depending on what you're selling and where your customers are located.
- Brand deals from abroad: Like with Google, these may fall under the reverse charge mechanism if the client is an overseas business.
Should You Register Voluntarily?
Even if your revenue is below the £90,000 threshold, voluntary VAT registration may benefit you if:
- You work mostly with VAT-registered businesses.
- You want to reclaim VAT on equipment, software, or services used in content creation.
But beware: if your audience is mainly individuals (B2C), registering may make you less competitive due to having to add VAT to your services.
Final Thoughts
To summarise:
- Yes, your YouTube income counts toward the VAT threshold.
- AdSense revenue is a reverse charge service, not directly subject to UK VAT, but still reportable.
- Sponsorships and brand deals may be VATable depending on the client’s location.
Managing VAT as a content creator can get complex, especially with mixed revenue streams. That’s why many turn to specialist accountants for influencers to ensure they're compliant and tax-efficient.
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