Esports tax: a guide to the basics – TaxScouts

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Esports tax: a guide to the basics

We've updated this guide on 26th May 2021

Are you a Twitch streamer or Youtuber? Do you play esports for money? Then you might be wondering whether esports tax applies to you. Unfortunately, even the world of online gaming and streaming is not free from tax! 

If you’re based in the UK and receive money from Twitch donations and advertising revenue, or if you get paid from working in esports, then you might have to pay tax on this income. If you don’t, you could end up in trouble with HMRC. You might even face some hefty fines as a result!

Here’s everything you need to know about esports tax in the UK.

How do I know if I need to pay esports tax?

In most cases, if you earn extra money from streaming, gaming and/or advertising revenue, you’ll need to inform HMRC and file a Self Assessment tax return.

In the UK, everyone can earn up to £12,570 in a single tax year, without having to pay Income Tax. However, it’s a common misconception that this figure applies to every different job you might have. That’s not true! 

For example, you could earn £10,000 in a year from your main job, and £9,000 from your esports side gig. In the eyes of HMRC, you’ll have earnt £19,000 overall and will have to pay tax.

If you’re unsure whether you need to pay esports tax, you can use our handy income tax calculator below!

Annual self-employment income
£
Self-employment expenses
£
Select tax year
Income after tax
£37,986
Income tax
£7,300
NI
£3,714
Total income tax
£7,300
£12,500 taxed at 0%
£36,500 taxed at 20% : £7,300
Total NI contributions
£3,714
Class 2 NI: £159
Class 4 NI at 9% : £3,555
What you’re left with
£37,986

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How your income tax is calculated

As a self-employed you have to pay your income tax and national insurance contributions yourself during your annual self assessment. Our calculator helps you quickly assess how much payment is due.

However you may be eligible for a tax refund when:

  1. You already made tax payments for the year but your annual income ended up smaller than planned
  2. You have done things that qualify for tax relief (made private pension contributions, give to charity, etc)

In your case when you earn £49,000:

Income tax breakdown

You pay no income tax on first £12,500 that you make

You pay £7,300 at basic income tax rate (20%) on the next £36,500

Do I need to file a tax return if I’m employed full-time by an esports team?

If you’re a member of an esports organisation and it’s your full-time job, then you’ll pay Income Tax and National Insurance through your wages via PAYE. This is usually taken from your salary before you even receive it, as all PAYE is sent directly to HMRC by your employer. 


But do you need to file a tax return too?

It depends on whether you make any additional money alongside your esports salary. For example, if you make revenue through your own personal Twitch or Youtube streams, this is classed as a separate form of income and you’ll need to complete a tax return. HMRC will combine the two incomes and tax you based on that lump figure.

I have a full-time job but I make money from esports on the side, what do I need to do?

Firstly, you need to register as self-employed – even if you’re still in full-time employment. 

You’ll then need to complete a Self Assessment tax return on the extra money you make from your esports side gig every year. This is because it’s untaxed income and HMRC requires you to declare it to them yourself. 

In your tax return you’ll have to detail all your income and expenses, and then pay tax on your profits. The amount of income tax you’ll pay will be calculated on your total earnings for both your side gig and full-time job.

Are you under 18? 

The rules around esports tax still apply if you’re under 18. 

If you make more than £12,570 in a single year, you’ll need to pay tax on this. Whether it’s through PAYE or Self Assessment, if you’re not sure how to pay tax yourself, it’s best to get help from an adult to make sure you do everything by the book.

How much esports tax will I need to pay?

You’ll pay both Income tax and National Insurance on your esports earnings. How much Income Tax you’ll pay depends on your tax band and the amount you make. 

Currently, the UK basic Income Tax rate is 20%. This increases to 40% for your earnings above £50,270 and to 45% for earnings over £150,000. Remember though, that earnings below £12,570 are tax-free! However, for every £2 you earn over £100,000, your allowance is reduced by £1.

Don’t forget about National Insurance, you’ll be required to pay this on top of Income Tax! You can see how much you’ll need to pay here.

Is the money I make from donations and video revenues taxable?

If the money you make from Twitch donations, Patreon or Youtube revenue is more than £12,570 in a single year, then you must pay tax on it. 

Now, we know what you’re thinking; ‘I thought donations weren’t taxable?’

Well, don’t worry, you’re not the only one! Charities don’t pay tax on money if they use it for charitable purposes. However, the word ‘donation’ on these streaming platforms is very misleading as it isn’t the same as a charity donation. 

Ultimately, if you receive a donation on Twitch or Paypal, it’s no different than the money you make from another job. You must pay tax on it like you would with any other form of income. 

It’s also worth noting that merchandise revenue, sponsorship money and competition winnings are also all taxable.

What about charity streams?

If you raise money for a charity via streaming, you don’t need to pay tax on the revenue. As long as you pass the money onto your charity of choice, there’s nothing to worry about regarding tax!

Are there any expenses I can claim back on e-sports tax?

Yes! If you need to file a tax return, you can claim expenses on some of the costs you might incur for streaming. 

The general rule surrounding claims is that any expenses that you have incurred which are ‘wholly and exclusively’ for your job are tax deductible. This includes:

  • A new laptop or computer
  • Recording equipment
  • Editing software
  • High-speed internet connection
  • Desk and chairs
  • Headphones
  • And much more!

These allowable expenses will reduce your overall taxable income.

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