New research from Tide, the UK’s leading business management platform, reveals that the rise of the creator economy is helping millions of Brits turn their passions into profit – with the average social media earner now making £1,223 a year.

However, as more creators transform side hustles into thriving small businesses, many may be unaware of HMRC’s £1,000 trading allowance – meaning they could unintentionally miss out on staying fully compliant as their ventures grow.

Platforms such as TikTok, X and YouTube give anyone the opportunity to make additional income. This could be through promoting products available on the TikTok shop, brand collaborations or the monetisation of high-performing content. Tide’s research has found that four in ten (42%) social media users aged 18 and over have received money or free gifts in return for their posts.

The average annual financial gain for this activity is £1,223, with a fifth (21%) of those who receive income for their content making over the £1,000 HMRC tax-free allowance on trading income.

However, despite the legal requirement to file a self-assessment tax return if any additional earnings, including the value of gifted items, total more than £1,000 in a single year, just 52% of social media users say they are aware of this requirement. With only 44% of those who make money from their content saying that they have filed a self-assessment with HMRC.

With penalties starting at £100 for missing the self-assessment filing deadline and increasing the more time passes, fines could total well over £2 million in a single year.

These figures are most concerning for social media users aged 18 to 24-years-old, as just 36% of them have filed a self-assessment with HMRC, despite more than half (55%) making financial gain from their social media activity – the highest of any age group surveyed.

Heather Cobb, UK Managing Director at Tide, warns social media users that they could be at risk of penalties if they’re not aware of the rules:

“It’s great that TikTok, Instagram and other social platforms have opened up new ways for people to add to their income, and what might start as a bit of extra pocket money can quickly spiral into a serious side hustle.

“Most people won’t treat this as a legitimate business venture at first, so it can be easy to lose track of exactly how much has been made over the course of a year. Especially for those who receive gifted items in return for social media promotion, as the value of these items also counts towards the yearly £1,000 allowance. Unknowingly going over this can result in a costly penalty

“This can range from a ‘failure to notify’ penalty to late return and payment penalties. As these penalties are often based on a percentage of the tax owed, they can amount to substantial sums for millions of creators to cover.

“Our advice is to keep track of what you earn from the very first payment, and Tide makes it easy to open a separate business account for each business you run. Tools such as Tide Accounting also make it easy to track earning and expenses. That way, you’ll be able to understand whether you’re over the allowance and need to tell HMRC, as well as monitor the growth of your new side hustle”.