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When it comes to taxes, the term donation understandably causes confusion. 🤯
As donations are generally viewed as gifts, we naturally don’t feel responsible for receiving them.
But, the terms donation and tax-free are interchangeable, right?
The tax you pay reflects how much you earn, not how you earn it, and HMRC will want to know exactly how much that is!
Fortunately, we’ve got your back when it comes to navigating taxes for this growing streaming service. 🙌
If you’re reading this guide, then you’re probably already familiar with Twitch.
But, there may also be a few of you who are upcoming musicians, avid gamers, or sports lovers wanting to find out more about the platform. 🎮
So, for those of you who don’t know, Twitch is a live video streaming service.
A few things you should know about Twitch:
But you’re not here for a history lesson. We get it. Where taxes are concerned, you want to know your stuff! 🧑🏫
Once you’ve built up a Twitch fan base, the term ‘Twitch Bits’ might enter your vocabulary.
Twitch Bits (donations) are a digital currency which can be bought to support streamers, gain recognition, get attention in chats, and more.
Technically, anyone can earn Twitch Bits. But, to gain access you must meet a set of requirements.
There are two ways you can use the streaming platform:
To become an affiliate, you must do all of the following within a 30-day period:
Already bossing your affiliate account? Then see if you meet the requirements to become a partner.
In a single 30-day span, you must:
If you meet the requirements for either of these programs then expect Twitch to slide into your DM’s.
Just as you thought you were about to become Alan Sugar, HMRC entered the chat. And, now you’re wondering – are Twitch donations taxable?
If there’s a will, there’s a way, and like most forms of income, HMRC will want you to declare your donations once their total exceeds £1,000.
If you’re lucky enough to earn over £1,000 from Twitch you’ll need to inform HMRC and file a self-assessment tax return. 🗒️
If your Twitch channel is a hobby or side hustle, then it is likely that you’re receiving another form of income. 💰
Let’s say that you’re earning £10,000 in Twitch donations and £20,000 from another form of employment in a single tax year, you will earn a combined income of £30,000. Because this income exceeds your personal allowance (£12,570) you’ll have to pay some tax.
If you’re unsure about exactly how much you’ll pay then you can use our income tax calculator:
When you’re self-employed, you have to pay your income tax and national insurance contributions yourself in your annual Self Assessment. Our calculator helps you quickly assess how much you owe.
However you may be eligible for a tax refund when:
In your case when you earn £50,000:
You pay no income tax on first £12,570 that you make
You pay £7,286 at basic income tax rate (20%) on the next £36,430
No contributions on the first £9,568 that you make
You pay £3,549 in contributions (at 9%) on the next £39,432 that you make
You pay £159 in NI Class 2 contributions
HMRC will combine your Twitch donations with any other income you have received during the same tax year. This could be from full-time employment or other side hustles.
How much Income tax you’ll pay depends on your tax band, but here’s a quick summary:
|Up to £12,570
|£12,571 to £50,270
|£50,271 to £125,140
If you’re looking for more information on the basics of Esports tax, then you can view our guide here.
If you pay close attention to our guide linked above, you can find expense suggestions that you can claim back to reduce your overall taxable income! As we said, we’ve got your back! 💻
National Insurance (NI) is a tax contribution paid to HMRC by employees, their employers, and the self-employed. This entitles people to certain provided benefits such as the State Pension and the Maternity Allowance. 🤱
You’ll have to pay National Insurance if you’re 16 or over and are either:
You do not pay National Insurance but still qualify for certain benefits and the State Pension, if you’re either:
If you’re self-employed you stop paying Class 2 National Insurance (self-employed people earning profits of £12,570 or more a year), when you reach State Pension age. ✅
🚨From 6 April 2024 (the 24/25 tax year onwards), Class 2 National Insurance is being scrapped. If you’re under the threshold and pay them voluntarily to qualify for benefits, you’ll still be able to do so.
At the same time, Class 4 is reducing from 9% to 8%.
Now you know the tax basics, there’s no reason why Twitch can’t be your side hustle today and full-time job tomorrow! 💪 And don’t forget – if you need a helping hand with your taxes, we’re always here to help.
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