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You posted a video, it went viral, and suddenly your TikTok Shop affiliate dashboard is showing numbers you used to only dream about. It’s an incredible feeling—until the panic sets in.
"What about tax? Do I need a business bank account? Am I going to lose half of this to HMRC?"
I hear this every day. At Social Commerce Accountants, we work with creators who go from zero to five-figure months overnight. The transition from "just posting videos" to running a legitimate business can feel overwhelming, but getting your structure right early on is the best way to protect those earnings.
One of the most common questions I get is about TikTok affiliate tax UK rules: specifically, should you stay as a sole trader or incorporate as a limited company?
There is no one-size-fits-all answer, but there is a right answer for you. Let’s break it down.
First, let’s clear up a misconception. You do not need to register a business the second you earn your first penny.
HMRC provides a trading allowance. For the 2024/25 tax year (and looking ahead to the HMRC trading allowance 2025), you can earn up to £1,000 in gross income tax-free without needing to tell HMRC.
What this means for you:
If your total income from TikTok (affiliate commissions, Creator Fund, gifts) is under £1,000 in a tax year (6th April to 5th April), you don’t need to do anything.
However, once you cross that £1,000 threshold, you are legally required to register for Self Assessment. At this stage, you are automatically a "Sole Trader."
Most creators start as sole traders because it’s free and easy. But as your commissions grow, the limited company route becomes more attractive.
Here is a quick comparison to help you understand the landscape:
If you are looking for a sole trader vs limited company UK calculator, the general rule of thumb in the accounting world is the £50,000 profit mark.
Why £50k? Because that is roughly where the Higher Rate (40%) of Income Tax kicks in for sole traders.
As a sole trader earning £60,000, you pay 40% tax on everything above £50,270.
As a limited company director, you have more control. You can:
Corporation tax for influencers UK creates a ceiling on tax rates that can be beneficial once you are generating significant surplus cash.
Tax isn't the only driver. Limited liability protection for affiliates is a massive factor often overlooked until it’s too late.
If a brand sues you for breach of contract, or a viewer sues you because a product you recommended caused harm (rare, but possible), a sole trader is personally on the hook. A limited company provides a "corporate veil" that protects your personal savings and home.
Furthermore, big brands prefer B2B (Business to Business) contracts. seeing "Ltd" after your name signals that you are a professional operation, not just a hobbyist. It can genuinely help you negotiate higher retainers.
I’m not here to sell you a limited company if you don't need one. There are downsides, and for TikTok creators specifically, there are two major headaches you need to know about.
Here is a reality check: The integration software for creators/affiliates doesn't really exist yet.
Unlike Shopify sellers who can link Xero and A2X seamlessly, TikTok affiliate platforms are messy. Getting the data out of TikTok and into accounting software often involves manual CSV downloads and spreadsheets. As a limited company, your record-keeping must be impeccable. You cannot just guess. This means higher accountancy fees or more time spent on admin.
When you register a limited company, your details go on the public Companies House register. This includes your service address.
Pro-Tip: Do not use your home address.
For a TikTok creator with a public following, this is a safety risk. When we set up companies for creators, we always recommend paying for a Registered Office Service or Virtual Office. This keeps your home address off the internet and ensures your fan mail doesn't get mixed up with HMRC letters.
Ready to make the move? Here is the workflow:
Do I need to pay tax on TikTok gifts?
Yes. TikTok Shop earnings tax rules treat gifts (diamonds/coins) that can be converted into cash as taxable income. It is payment for a service (entertaining), not a birthday present.
How much can I earn on TikTok before paying tax?
You have a £12,570 personal allowance (tax-free) across all your income sources. However, you must register with HMRC once your gross trading income hits £1,000.
Is TikTok income self-employment?
Yes. Unless you are directly on the payroll of a company (like an agency), you are self-employed.
Can I expense my phone bill for TikTok?
Only the business percentage. If you use your phone 50% for creating content and 50% for personal calls, you can only claim 50% of the bill as an expense.
If you are hitting consistent £5k+ months, worried about liability, or want to look more professional to brands, it’s likely time to incorporate. If you’re just starting out, keep it simple as a sole trader.
Need help crunching the numbers? At Social Commerce Accountants, we specialise in the creator economy. We know the difference between a Spark Ad and a Dark Post, and we know how to save you tax.
Sam Hoye is the Co-Founder and Managing Director of Social Commerce Accountants, a UK-based firm specialized in supporting e-commerce brands, influencers, and social sellers. With over 15 years of experience in accounting and business strategy, Hoye established the company (originally known as Guide Hustle) in 2021 to address the specific financial needs of online businesses operating on platforms like TikTok Shop, Amazon FBA, and Shopify. He is actively involved in the industry, regularly authoring guides and articles that help digital entrepreneurs navigate complex tax and compliance landscapes.
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