If you’re earning money on the streaming platform Twitch as an affiliate, a partner, or via donations, you’ll need to pay income taxes. If your revenue is more than £1,000, you’ll need to register at the HMRC as self-employed, and file an annual tax return. The first £12,500 you earn within a tax year from all your revenue sources combined (wages, freelance work, and everything else) are tax-free. Above that, you need to pay taxes.
In the UK, the tax year is from April 6 (f.e. 2020) of the previous year to April 5 this year (f.e. 2021), and you need to report your income by the end of January of next year (which would be January 31, 2022).
Types of taxable revenue from Twitch
All money received from Twitch is taxable: ad revenue, subscriptions, donations, bits. All revenue from Twitch needs to be reported, including donations.
Twitch donations are not the same thing as money received by charity organizations (which are tax exempt); instead, they are considered as income by tax offices. This means that you need to count donations towards the £1,000 threshold, too. You need to report your gross income, i.e. before the Twitch fees.
2) Ad revenue
In terms of ad revenue, Twitch functions similarly to YouTube: you’ll get a portion of the ad fees companies are paying to place an ad on your channel. This revenue is also taxable.
You can become an affiliate or partner and receive money on channel subscriptions. Affiliates get 50% of the subscription fees, while partners sometimes get more. The amount you receive is the amount you need to declare.
Subscribers can purchase bits to use emojis in chat rooms. Twitch pays streamers a portion of the bits price.
The registration process at Twitch
Once you register at Twitch, you’ll need to do a tax information interview, which is essentially an online form you fill in. Twitch is a US company and all Twitch streamers will need to fill this form, which they then submit to the IRS (the US tax office). You need to complete this step to avoid a 30% fee deducted from your earnings. If you notice that Twitch is deducting 30% from your earnings, this means that the tax information interview wasn’t completed correctly. Check your account to see if that’s the case and get in touch with Twitch, if needed. Twitch will request your tax identification number (TIN). For individuals, this is your NI number or, for companies, your UTR number. You also need to fill in a W-8BEN form.
For your initial earnings, you can use a self-employed status; if you plan to make Twitch an important source of income, you might consider registering a limited company.
Each year, Twitch will send you a yearly earnings statement - the ‘Form 1042-S Foreign Person’s U.S. Source income Subject to Withholding’; in most cases, you don’t need to do anything, but it’s still important to keep a copy on record.
How can Fonoa help?
If you have registered a company or sole proprietorship to withdraw the income earned from Twitch, we can help you to comply with invoicing regulations in your country.
In most cases, to meet your accounting obligations, you need to issue an invoice for every amount of money you receive on your account.
Fonoa got you covered. Our Invoicing product will help you issue fully compliant VAT invoices, so you can focus on scaling your business and income.
Reach out to us, and we will help you automate your invoicing process.