'I definitely made more in ad revenue than I paid for the car': How YouTubers balance their books
All freelancers struggle to work out what counts as a tax write-off. But what happens when you’re a YouTuber and your reasonable business expense is an old car and a $500 supply of nail polish?
It costs around 2,500 Canadian dollars (roughly £1,400) to make a YouTube video in which you cover an entire four-door car with nail polish – Cristine Rotenberg knows this from experience. In 2016, the Canadian YouTuber painted the cheapest car she could find with roughly $500 (around £300) worth of pink, blue, and black nail polish before taking her new ride for a spin. The stunt undoubtedly paid off – the video was watched over 13.4 million times, and today, Rotenberg has 7.7 million subscribers.
To date, this is one of the most expensive videos 32-year-old Rotenberg has ever created for her nail art channel, Simply Nailogical (thankfully, it’s also one of her most viewed). “I definitely made more in ad revenue than I paid for the car,” she says now via email. Rotenberg says her usual content doesn’t involve these kinds of expenses but notes, “there are endless examples of YouTube videos where the entire premise of the video is how expensive the video was to make.”
At the time of writing, the number one video on YouTube’s Trending page is entitled, “$10,000 Challenge Forfeit In Dubai” – in it, three YouTubers play mini-golf, and the losers are forced to buy a fancy meal for the winner (the dinner actually ends up costing around $1,500, which is around £1,100). Towards the end of the video, one of its stars jokes about using his business account to pay for the food. But what exactly is the reality behind this kind of gag, and how do content creators really balance their books? What goes on behind the scenes with budgets and expenses? Most pressingly of all: when is a gift not a gift?
Coverage of YouTubers, bloggers, and influencers frequently focuses on how much money they make, but very rarely examines how much they have to spend. Even without a nail polish-covered car or four-figure dinner, content creators have to spend money to make money – be that on camera and lighting equipment or clothes hauls and mukbang feasts. “At this point, I’ve definitely invested tens of thousands of dollars into cameras, lenses, lighting, computers, external hard drives and professional editing software,” Rotenberg explains.
Talia Maizels is a 21-year-old YouTuber from Essex who has been creating videos for over three years. When she was 19, she was able to quit her job at Waitrose to become a full-time content creator thanks to her 93,000 YouTube subscribers. Initially, she used her brother’s old camera for her channel before investing in a £500 Canon PowerShot G7 and some £150 lights.
“People buy clothes and say ‘I’m using it wholly for my business’ and HMRC are kind of like, ‘Actually, no, you’re not, because you can’t walk around naked.’”
“I think a lot of people just see the end product and that’s all they think about – they don’t think about all the hard work and money that goes behind it,” Maizels says. She uploads two to three videos a week ranging from hauls (videos in which creators showcase their recent purchases) to mukbangs (videos in which creators film themselves eating large quantities of food).
“It’s not like a normal business where you can say, ‘Okay, if I buy this for £50, I’m going to make £50 profit on top’, because you obviously never know how a video is going to perform,” Maizels says when asked about budgeting. “It is definitely a risk.” For example, Maizels and a friend recently did a Christmas present swap where they both agreed to spend £100. “We were like, ‘Well, hopefully, it makes the money back’, but you just never know if it will or won’t.” (In the end, Maizels did make the money back “and profit on top”.)
Maizels, therefore, approaches her budgeting based on her profits: if one video does well, she’ll use the money to create a more expensive piece of content later (in many ways, this is no different from traditional businesses who reinvest money after profitable quarters). Rotenberg has a similar system. “I don’t set budgets per video, I take it one video at a time and consider whether the concept is feasible considering the revenue my channel is generating at the time,” she says. “Most of my videos are inexpensive to produce so it makes it easier to justify occasionally buying something absurd like a car to paint with nail polish.”
Since launching her YouTube career, Maizels has relied on her family accountant to advise her about spending and what she can and can’t expense as part of her business (expenses are deducted from an individual or business’s overall taxable income). Maizels expenses her mukbang videos because – she says with a laugh – “I wouldn’t necessarily get, like, a whole Dominos for lunch every day”. Haul videos, however, are far trickier.
“I personally don’t like to use hauls as an expense because it just feels a little bit strange,” she says, explaining that she wears the clothes she buys outside of her business. The exception is when Maizels buys clothes to review that she won’t actually go on to wear, such as an October video in which she tried on £5 dresses from Pretty Little Thing.
John McCaffery is a Tax Partner at Alexander & Co., a Manchester-based accountancy firm that has a number of influencers on its books. McCaffery explains a purchase made by a UK content creator must be “wholly and exclusively” for business purposes in order for them to expense it and make it tax-deductible (the same is true for any freelancing business, not just those run by influencers).
“The big area is clothes,” he explains, “People buy clothes and say ‘I’m using it wholly for my business’ and HMRC are kind of like, ‘Actually, no, you’re not, because you can’t walk around naked.’” McCaffery explains that “certain accessories and costumes” are definitely tax deductible but there’s “a lot of grey area”. Holidays are equally tricky – while an influencer could claim they went on vacation purely to create content, McCaffery says this could be difficult to argue in practice.
Yet on the flip side, McCaffery goes on to say that some influencers could potentially expense tooth whitening treatment, provided they could prove they did it solely for their online image. “With all expenses, it comes down to intention when you incur the expense, how you evidence that intention, and whether you can justifiably argue that it was wholly and exclusively for your business.”
Lucy is a 25-year-old online creator from London who has 291,000 YouTube subscribers and 97,000 Instagram followers on her “Lucy Moon” accounts. She describes herself as “very cautious” when it comes to declaring her expenses and says she tries not to buy too many items for her videos.
“I definitely made more in ad revenue than I paid for the car”
“I’ve heard stories of HMRC pulling up online creators on their expenses as we’re easy to make an example out of, so I tread very carefully,” she says. In particular, she is careful around equipment that is “dual purpose” – something she might use both for, and outside of, work. McCaffery says traditional businesses also struggle with this, citing laptops that are used for both business and leisure. “If you’ve got a camera which you use mainly for your business, most people would expense all of that,” he says, “But you could put the majority through, or claim the whole expense on your business but take a personal tax charge for any personal use element.”
Of course, it’s likely that at least some content creators do break the rules by expensing unnecessary and extravagant purchases. Another issue in this area is transparency, with many creators unwilling to discuss their finances (in the course of writing this article, I contacted over 20 YouTubers who create shopping videos in which they deliberately spend large sums of money, but none responded to a request to be interviewed). Some creators do buck this trend – in November, beauty guru Patricia Bright uploaded a video entitled “$700,000! Showing you EVERYTHING I've SPENT & the real COST to be an INFLUENCER!” while Rotenberg runs a podcast on which she has discussed her business and finances in the past.
But even without this kind of transparency, McCaffery points out that if HMRC did investigate a UK content creator, they’d have an abundance of easily accessible evidence. “They’ve got this supercomputer that pulls information from 30 or 40 sources – land registry, bank accounts,” he says, “And [influencers] have made it pretty easy for them because they can go on YouTube, Instagram, Twitter, and TikTok and compare them to what’s on the tax return.”
On the whole, however, McCaffery says trickery isn’t the issue – much more common is good old-fashioned confusion, with new content creators unaware about the rules. One especially tricky area is products that are gifted to influencers – McCaffery says if a gift is given in exchange for a piece of content, then UK influencers should be declaring the value of the gift as part of their taxable income (so, for example, if they got an £100 tooth-whitening kit in the post, they’d have to pay taxes on that £100, even though no money changed hands).
“What I find quite interesting about influencers is it’s a very modern phenomenon but in terms of finances, it goes back to the earliest forms of taxation, because they’re barter transactions,” he says. McCaffery says if a gift “just arrives” in an influencer’s PO box, then it’s genuinely a gift, but if it is given in exchange for promotion, then the value of the gift is taxable. He says this remains the case even if the arrangement between the company and the influencer is verbal and not written down.
If some influencers are unaware of this, it’s evident audiences are even less aware. Like Maizels, Lucy says the public underestimate the cost of online creation, particularly when it comes to hiring support like photographers or podcast editors. She adds that many people assume all influencers are rich. On the flip side, Rotenberg advises aspiring YouTubers that they can make videos with their mobile phones and avoid expensive props and products, and notes the rising popularity of anti-haul content in which creators talk about products they’re not going to buy. She also advises creators to educate themselves about more traditional business expenses they can claim, especially if they work from home or travel for work.
As for the car, that was expensed (and it was donated to charity after the video was filmed). Rotenberg says she’s “pretty conservative” when it comes to her expenses, but says purchases that are clearly “stunts” for videos – “and not something I otherwise get any sort of personal use or benefit from” – are easiest to comprehend.
“If I spend $200 [£115] on tea so I can fill a bathtub full of tea and bathe in it, I’m doing that because people will click on that video which will, in turn, generate revenue for my business,” she says (and they did, the video in question got 4.8 million views).
“Unfortunately, once I’ve steeped my body in tea, I can’t drink it. And if I ever feel like bathing in tea when the cameras aren’t rolling, I’d have to buy that tea personally.”
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