The question of do YouTubers pay tax is perhaps not the right question—we can’t speak for every YouTuber out there. Should YouTubers pay tax is a much better question, and, in many cases, yes, if you earn enough money through your YouTubing exploits, you should probably be paying tax on those earnings.
The exact rules surrounding whether you should pay tax or not will be entirely dependent on how much money you make, the laws in your country of residence, not to mention your personal employment situation.
For example, two of the biggest countries in terms of YouTube usage—the United States and the United Kingdom—allow a certain amount of untaxed income. For the United States, it is called deductions and is around $12,200 a year. For the United Kingdom, it is called Personal Allowance and is around £12,500 a year.
In practical terms is that if someone in the United Kingdom made £10,000 from their YouTube channel in one year and didn’t earn any other income, they would not be required to pay tax on that money.
On the other hand, if they earned £13,000, they would have to pay tax on the £500 over the allowance. None of the above factors in other sources of income, such as a regular job.
Now would be a perfect time to make it clear that nothing in this post should be considered financial advice.
We are only covering basic premises here, and the realities of accounting are far from simple.
The only financial advice you should take away from this post is that if you are not sure about anything regarding your taxable income, hire an accountant to take care of it for you.
Will YouTube/My MCN/Advertising Partners Pay the Tax?
No on all accounts. Unless you have a very unique agreement with your multi-channel network or advertising partners, you will be classed as a contractor, and responsible for your own taxes.
Also, though a relatively small detail in terms of practical importance, it’s worth noting that YouTube are not actually the ones paying you. YouTube is a video publishing platform, and nothing more, the money comes from Google AdSense.
Depending on your region, Google may be required to collect some tax-related data from you when you sign up for an AdSense account, but this is essentially to make it easier for your government to catch you not disclosing your income. You will have to record, disclose, and pay tax on your earnings yourself.
You can hire an accountant to do this for you, of course. And in many cases, that is probably the best thing to do. But an accountant acts on behalf of you and has no dealings with a company like AdSense or YouTube.
Can I Get Away With Not Paying Taxes on YouTube Earnings?
Again, this is a question of should, rather than could. You certainly can get away with not paying taxes on your YouTube earnings, but you really shouldn’t.
There is an ethical position to argue in that you are responsible for contributing to the society you live in. However, the more compelling argument for some would be the consequences if and when you get caught.
For the vast majority of YouTubers, it wouldn’t necessarily be a problem, since most YouTubers earn very little money from their channel.
This not to say there couldn’t be consequences, and again, we must stress this is not financial or legal advice, but governments aren’t usually in the habit of immediately putting people in prison over a few hundred dollars. In the case of the UK, there are very few tax evasion prosecutions for amounts less than £50,000.
Given that the tax you pay is a percentage of your overall earnings, not to mention any allowances and deductions you are entitled to, you don’t have to do the exact maths to see you would have to have been earning a significant chunk of change to find yourself in prison.
That being said, it’s worth noting that if you get caught, even over a matter of a few dollars, you can still end up in a courtroom if you don’t cooperate. In other words, we’re not saying your government will turn a blind eye if the amount you owe is small; we’re just saying they probably won’t lock you up.
In general, though, various tax offices are happy to give you a slap on the wrist and let you just pay the amount you owe, rather than take you to court and put you in prison for it.
Where things can get dicier is if you repeatedly do not declare your income and pay your taxes. As an example, if you failed to report YouTube income that would have amounted to an extra £200 on your tax return, under UK law, the worst-case scenario would see you paying somewhere in the region of £500 after interest and penalties.
Granted, £500 is no small amount of money, but it’s not the end of the world, and it’s certainly better than going to jail. However, if you let that slide for a few years, it can quickly get into the thousands. And if your channel is enjoying growth over that period, which would imply your earnings are also growing, then things can really spiral out of control.
If you’ve ever wondered how these celebrities you see in the news manage to find themselves owing hundreds of thousands—even millions—in taxes, this is how.
The key to avoiding this kind of situation is to keep precise records about your earnings.
Granted, there will always be a record somewhere in today’s connected age, but if you want to avoid having to trawl through all your AdSense payments for the past year on tax return day, it helps to keep your own records. Anytime you get an AdSense payment, make a note of it. If you get a brand deal or a company sponsor one of your videos, record it.
You don’t have to spend money on expensive accounting software; a simple Google Sheets spreadsheet will do the trick. In it’s simplest form, such a spreadsheet might look like this;
And that’s all there is to it. If you want to get fancy, you can tweak the spreadsheet to show you things like your projected earnings, the amount of tax you’re likely to owe, and more.
Now, you’ll have noticed that our sample spreadsheet doesn’t have any outgoings. You will need to check your region’s laws on tax deductions, but it is usually the case that “work” expenses can be deducted from your taxable income. How this works specifically in your country is something we won’t even attempt to describe, due to the many different rules from country to country, but regardless of how the deductions are calculated, you need to have a record of them if you want to take advantage of deductions.
It’s important to note that business expenses need to be justifiable as, well, business expenses. If you spend eight hundred dollars on a new camera for your YouTube channel, that can be justified as a business expense, even if you occasionally use it for personal things.
On the other hand, if you spend twenty thousand dollars on a car and your YouTube recording setup is in the spare room, you will have a hard time convincing anyone that you need the car for business reasons.
You may be able to deduct things like fuel if you used the vehicle to drive to a location to shoot a video, but the car’s primary use would have to be work-related if you wanted to class the car as a business expense.
When you are classed as a freelancer, or self-employed, or a contractor, or whichever term you feel best fits what you do, it doesn’t necessarily matter what you are doing.
The government wants you to declare your income and pay your taxes, and as long as you are earning your money legally, they don’t care if you are making YouTube videos, selling mop heads door-to-door, or any of the other seemingly endless ways of making a living that is available to you these days.
It shouldn’t be surprising, then, that people are increasingly diversifying their income streams.
While being a full-time YouTuber is a dream for many, the reality of that dream for an increasing number of people is that YouTube forms just one spoke in a whole wheel of income sources. Perhaps YouTube is only making a quarter of what you need to cover your living expenses, but you also do a little Uber driving on occasion and write for a blog from time to time.
All of this income flows into the same pot as far as tax collectors are concerned. From your perspective, you would simply be adding an “Uber” line to that spreadsheet we talked about (and you might finally be able to class your car as a business expense!) if Uber was one of your income sources. As mentioned above, the important thing is that you keep clear records of it all.
As a slight side note, we mentioned above about YouTube being one spoke in a wheel of income sources—this is a good plan for any YouTuber, whether you are making a few dollars a month or a few thousand dollars a month.
The old saying about not putting all your eggs in one basket is particularly apt for YouTube, as anyone who has fallen afoul of one of the many “Adpocalypses” will tell you. Even if your YouTube success is paying all the bills, it’s a good idea to spread your wings a little and make your money in other places. And definitely don’t rely on AdSense payouts alone.
Always Factor Tax into Your Decision to “Go Pro”
If you do decide to go full time with your YouTube channel, or you are planning to quit your day job in favour of being your own boss and YouTube will form a significant portion of where you expect your income to come from, be sure to take taxes into account when you are running the numbers.
Tax can be a little tricky to work out. For example, UK tax only applies after your personal allowance deduction has been applied. Getting £12,500 tax-free is great, but it can make working out your projected earnings a little trickier. For example, if you make £17,500 in one year, you are only paying tax on £5,000. The tax rate for that amount of money (currently) is 20%, which equates to £1,000.
It gets even more complicated if you make a lot of money. There are different tax bands in the UK, and each one only applies to money within that band. So;
- £0 – £12,500 has a tax rate of 0%
- £12,501 – £50,000 has a tax rate of 20%
- £50,001 – £150,000 has a tax rate of 40%
- £150,001 and above has a tax rate of 45%
This means that if you earned £150,400 in one year, you would get £12,500 tax-free. You would pay 20% on the next £37,500 (£7,500). You would pay 40% on the following £100,000 (£40,000). And, finally, you would pay 45% on the last £400 (£180). So your total tax on £150,400 would be £47,680.
Please note that these numbers assume a standard tax code, and were only accurate at the time of writing since they change every year.
All this number soup is to say that the amount of tax you will be paying is rarely intuitive, but you should make an effort to accurately calculate these figures before you hand in your notice at your day job. You don’t want to quit your job thinking YouTube can support you, only to find yourself struggling to pay a tax bill you weren’t expecting to get.
Remember, every nation is slightly different—and some are very different.
We’re using the UK tax system as an example because that’s what we’re familiar with, but be sure to check the specifics of your own region.