Everything You Need To Know About TikTok Shop Affiliate Taxes: UK Edition

If your TikTok feed has recently shifted from a hobby to a source of affiliate commission, you are officially a digital entrepreneur. In 2026, HMRC views TikTok Shop affiliates not just as "creators," but as businesses.

For many, the natural progression is to move from a Sole Trader setup to a UK Limited Company. This structure offers better liability protection and more sophisticated tax planning—but it also demands a much higher level of accounting precision.

This guide covers the essential requirements for managing your affiliate income through a Limited Company in the 2026/27 tax year.

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Income Recognition: Payouts vs. Earned Commission

The most critical part of managing your affiliate accounts is knowing when to record your income.

As a Limited Company, you typically use the accruals basis of accounting. This means you record the income when you have "earned" it (when the sale is made and the commission is confirmed in your dashboard), rather than just when the cash hits your bank account.

The Management Workflow:

• Monthly Accruals: At the end of each month, export your "Settlement Reports" from the TikTok Shop Seller Center.
• The Clearing Account: Use a "Clearing Account" in Xero or QuickBooks. You log the total commission earned as a Sales Invoice, then "pay" it into the clearing account. When the actual cash arrives in your business bank, you transfer it from the clearing account to match the deposit.

Why this matters: This ensures your Profit & Loss statement reflects your actual performance for that month, rather than being skewed by TikTok's 14–21 day payout cycles.

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The VAT Position on Affiliate Commissions

VAT for affiliates is often misunderstood. The £90,000 VAT registration threshold applies to your taxable turnover.

The "Place of Supply" Rule

In 2026, the VAT treatment depends on the location of the brand you are promoting:

• UK-Based Brands: If you promote a UK-registered company, your commission is subject to 20% VAT. This counts toward your £90,000 threshold.
• International Brands: If the brand is based outside the UK (e.g., US or China), the supply is often "Outside the Scope" of UK VAT. While this income is still taxable for Corporation Tax, it does not count toward your VAT registration threshold.

Management Tip: Categorise your commission by "Brand Region" in your accounting software. This allows you to monitor your VAT-taxable turnover separately from your global earnings.

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Corporation Tax and the 2026 Tiered Rates

As a Limited Company director, your primary tax concern is Corporation Tax. In 2026, the rates are structured based on your company's annual profit:

With the 25% rate applying to profits over £50,000, managing your allowable expenses is vital to ensuring you only pay tax on your true net profit.

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Legitimate Expenses for TikTok Affiliates

HMRC allows you to deduct allowable expenses that are "wholly and exclusively" for the purpose of your business. For a 2026 content creator, these often include:

• Content Production: Lighting, microphones, cameras, and editing software (CapCut Pro, Adobe, etc.).
• Sample Purchases: If you have to buy a product to review it, this is a legitimate business cost.
• Home Office: A proportion of your rent/mortgage and utilities if you use a dedicated space for filming and editing.
• Platform Fees: Any subscriptions for analytics tools or SEO research for TikTok trends.
• Professional Fees: Your accounting and legal costs.

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Director’s Payroll and Dividend Strategy

Managing a Limited Company allows you to be tax-efficient in how you extract your affiliate profits. For the 2026/27 tax year:

• Salary: Many directors take a salary up to the Lower Earnings Limit (£12,570). This keeps you within the Personal Allowance (0% Income Tax) while maintaining your National Insurance record for your state pension.
• Dividends: After the salary, you can take dividends from the remaining "Post-Tax Profit."
• The Dividend Allowance: In 2026, the tax-free dividend allowance remains at £500. Amounts above this are taxed at 10.75% (Basic Rate) or 33.75% (Higher Rate).

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Frequently Asked Questions (FAQs)

Do I pay tax on "Free Samples" sent by brands?

Generally, if a brand sends you a low-value item purely for review, it is not treated as taxable income. However, if you receive high-value items (e.g., a £1,500 laptop) in exchange for a video, HMRC may view this as "Payment in Kind," and it must be declared at its market value.

Can I run my TikTok affiliate income through my existing Shopify Limited Company?

Yes. If you already have a Shopify Limited Company, you can simply add "Affiliate Commission" as a new revenue stream in your accounts. This is often more efficient than running two separate companies.

What is the deadline for filing my accounts?

Your Company Tax Return (CT600) and Annual Accounts must be filed with HMRC and Companies House within 9 months of your company's financial year-end.

Do I need to disclose "Ad" or "Affiliate" on my videos?

Yes. While this is a legal/ASA requirement rather than a tax rule, failure to comply can lead to fines which are not tax-deductible expenses.

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About the Author

I am the founder of Social Commerce Accountants, a firm built specifically for the new wave of UK digital entrepreneurs. We specialise in the intersection of Shopify ecommerce and TikTok affiliate structures, helping creators move from chaotic spreadsheets to professional Limited Company management. My goal is to ensure your "viral" moments translate into long-term financial stability.

Disclaimer: This guide is provided for educational purposes only and does not constitute financial, tax, or legal advice. UK tax legislation is subject to change. You should always consult with a qualified accountant to discuss your specific business structure and liabilities.

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