Accounting for Paid Sponsorships: A Guide for Creatives in the UK

If you’re a singer, artist, influencer, or performer, you might be earning money from sponsorships, brand deals, or partnerships. Whether it’s getting paid to promote a product, featuring a brand in your content, or partnering on a campaign, these sponsorships are taxable income—which means they need to be properly tracked and reported.

Many creatives don’t realise they need to account for sponsorship payments, which can lead to unexpected tax bills later. To avoid this, here’s what you need to know about managing paid sponsorship income, tracking expenses, and staying compliant with HMRC.

1. Are Paid Sponsorships Considered Taxable Income?

Yes. Any money you receive from a brand, company, or organisation in exchange for promotion, content creation, or public appearances counts as taxable income.

Common types of sponsorship income include:

• Paid posts or collaborations on Instagram, TikTok, YouTube, or blogs.

• Brand partnerships for events, live streams, or content campaigns.

• Affiliate marketing income from commission-based sales.

• Merchandise or product collaborations with brands.

• Sponsored music videos or performances.

Even if a company pays you in free products instead of cash, HMRC may consider the value of those products as taxable income if they are given in exchange for promotion.

2. How to Track Sponsorship Income

One of the biggest challenges for creatives is keeping track of different income sources. Unlike traditional jobs where you receive a payslip, sponsorship payments often come from multiple brands and platforms at different times.

Here’s how to stay organised:

• Log every payment – Keep a spreadsheet or use accounting software to record who paid you, when, and how much.

• Save invoices and contracts – Brands usually request invoices before paying you, so keep copies for your records.

• Separate personal and business finances – Using a business bank account makes tracking easier.

If sponsorships are a regular part of your income, using accounting software like QuickBooks, FreeAgent, or Xero can help automate tracking.

3. Invoicing for Sponsorship Deals

Many brands require an invoice before processing your payment. A proper invoice should include:

• Your name or business name.

• Invoice number and date.

• Brand’s name and address.

• A clear breakdown of the service provided (e.g., “One sponsored Instagram post – £500”).

• Total amount due and payment deadline (typically 14 or 30 days).

If you are VAT-registered, you must also include VAT details on the invoice.

4. Can You Deduct Expenses from Sponsorship Income?

Yes. You can reduce your tax bill by deducting business expenses related to the sponsorship work. Allowable expenses might include:

• Equipment costs – Cameras, lighting, software, or props for sponsored content.

• Travel expenses – If you travel for a brand event, gig, or sponsorship shoot.

• Marketing costs – Ad spending, website hosting, or social media management.

• Professional services – Fees for accountants, video editors, or consultants.

Keeping detailed records and receipts is crucial—HMRC may ask for proof if you claim these expenses.

5. Do You Need to Pay Tax on Sponsorships?

Yes. Sponsorship income is self-employed income, which means you’ll need to:

• Register for Self-Assessment if you earn over £1,000 per year from self-employment.

• Pay Income Tax and National Insurance on sponsorship earnings (after expenses).

• Set aside 20–30% of your sponsorship earnings for tax to avoid surprises.

6. What If You Receive Sponsorship Payments from Abroad?

If you work with brands outside the UK, payments may be affected by currency exchange, international tax rules, and VAT.

• If a company pays you from outside the UK, you may need to declare it as foreign income on your tax return.

• Some brands deduct withholding tax before paying you—this could be reclaimable under double taxation agreements.

• If you work with US-based brands (e.g., YouTube sponsorships), you may need to submit a W-8BEN form to avoid unnecessary tax deductions.

If you’re receiving regular payments from international brands, it’s worth checking how this affects your tax situation.

7. VAT and Sponsorships – Do You Need to Register?

If your total self-employed income (including sponsorships, merchandise, and performance fees) exceeds £90,000 per year, you must register for VAT.

• If VAT-registered, you must charge 20% VAT on invoices for UK-based sponsorships.

• If working with international brands, VAT rules vary—some overseas clients won’t pay UK VAT.

For most creatives, VAT registration isn’t necessary unless earnings are high, but it’s something to consider as your career grows.

8. Do You Need an Accountant for Sponsorship Income?

If you’re managing a few small sponsorships a year, a spreadsheet or accounting software may be enough. However, if you:

• Work with multiple brands and international clients.

• Earn over £30,000 a year from sponsorships.

• Deal with VAT or withholding tax complications.

…then hiring an accountant (like us!) can save you time, reduce your tax bill, and keep you compliant with HMRC.

Final Thoughts: Stay Organised and Save on Tax

If you earn money from sponsorships, it’s important to track your income, deduct expenses, and plan for tax.

• Keep records of every sponsorship deal and payment.

• Save invoices, contracts, and receipts for expenses.

• Set aside money for tax so you’re not caught off guard.

• Consider using accounting software to simplify your finances.

With the right approach, you can manage your sponsorship income confidently—and focus on growing your creative career without financial stress.

If you're ever in need of help with setting up a limited company, sorting out your bookkeeping, accounting and tax submissions or would like some personal financial coaching, drop us a line by clicking on the 'Contact Us' button at the top of the page and we'll be happy to help.

#SponsorshipAccounting #FreelancerLife #SelfEmployedTips #InfluencerMoney #HMRCtips