Tax Implications on Affiliate Marketing in the UK (2025 Guide)

Affiliate marketing income in the United Kingdom is taxable. If you earn money through affiliate commissions, you are considered self-employed by HMRC. You must declare your income, file a Self Assessment tax return, and pay Income Tax and National Insurance. You may also need to register for VAT if your total turnover exceeds the current VAT threshold of approximately £90,000.

Why Affiliate Marketing Income Has Tax Implications

Affiliate marketing is a legitimate commercial activity. Whether you earn commissions through a website, blog, or social media channel, HMRC views it as a business operation rather than a hobby.
Once you start earning consistent income, it becomes essential to:

Register with HMRC as self-employed
File your annual Self Assessment tax return
Pay any Income Tax and National Insurance owed
Keep records of your income and related expenses
Register for VAT if your income grows beyond the threshold

Ignoring these responsibilities can lead to penalties and interest charges, even if your business is small or part-time.

1. Registering with HMRC and Reporting Your Earnings

If you earn more than £1,000 from affiliate marketing in a tax year, you must register as self-employed. This is because you will have crossed the HMRC “trading allowance.”
After registering, you will receive a Unique Taxpayer Reference (UTR) and be required to submit a Self Assessment tax return each year. On this return, you will report:

Your affiliate income
Your allowable business expenses
The resulting profit on which you will be taxed

If you earn less than £1,000 in total from affiliate commissions, you may not need to register. However, if you have other self-employed income, it is often best to register anyway for accuracy and flexibility in claiming expenses.

2. Paying Income Tax and National Insurance

As a self-employed individual, your affiliate income is subject to both Income Tax and National Insurance Contributions (NICs).
The standard 2025 rates are as follows:

Income Tax: You will pay 20 percent on profits up to £50,270, then higher rates beyond that amount.
National Insurance: You will pay Class 2 and Class 4 NICs once your profits pass HMRC’s small threshold. These contributions go towards your State Pension and other benefits.

If you are also employed elsewhere, you will still need to declare your affiliate income. HMRC will combine both sources of income to calculate your total tax bill, but your self-employment income remains reported separately.

3. What Expenses You Can Claim

You are allowed to deduct legitimate business expenses from your affiliate income before paying tax. This can make a significant difference to your overall tax bill.
Allowable expenses can include:

Website hosting and domain registration fees
Advertising and promotional costs
Internet, software, or digital tool subscriptions
Equipment such as laptops, cameras, or phones used for business purposes
Professional fees (for example, accounting or design services)
Travel and marketing-related costs

Keep every invoice and receipt. HMRC can ask to review your records for up to five years after submission.

4. VAT and Affiliate Commissions

If your total taxable turnover exceeds the VAT registration threshold (£90,000 in 2025), you must register for VAT.
Once registered, you may need to:

Charge VAT on your affiliate commissions
Submit regular VAT returns to HMRC
Keep detailed VAT invoices and accounting records

VAT treatment can become more complicated if you receive commissions from international companies. The place of supply, reverse charge rules, or EU affiliate payments can affect how VAT applies. It is often best to discuss this with a qualified accountant.

5. Earning Affiliate Income from Abroad

Many affiliates receive commissions from foreign companies such as Amazon, TikTok, or international affiliate networks.
If you are a UK resident, you must declare your global income. That means any affiliate income received from outside the United Kingdom still needs to appear on your Self Assessment return.
If foreign tax has been withheld, you may be able to claim foreign tax relief through the UK’s double taxation treaties. This prevents you from paying tax twice on the same income.

6. Common Mistakes to Avoid

Many new affiliates make the same tax mistakes, which can lead to HMRC issues later on. The most common ones include:

Treating affiliate income as a hobby or “side earnings” and not declaring it
Forgetting to register once you pass the £1,000 trading threshold
Not separating business and personal finances
Ignoring VAT once turnover grows
Poor record-keeping or lost invoices

Avoiding these errors will save time and prevent penalties. Using accounting software or professional bookkeeping support makes this process much easier.

7. Should You Set Up a Limited Company for Affiliate Marketing?

If your affiliate income grows significantly, you might benefit from forming a limited company. This allows you to pay yourself via salary and dividends, often leading to more efficient tax planning.
A company structure can also:

Protect your personal assets
Enhance your professional image with brands and networks
Provide clearer separation between business and personal finances

However, forming a company adds compliance obligations such as Corporation Tax returns and annual filings. Persona Finance can help you compare both options and manage the transition when the time is right.

FAQs

Do I need to report affiliate income if I only earn £500?
If your total income from affiliate marketing is below £1,000, you may not need to register with HMRC. However, if your income is consistent or you want to claim business expenses, registering is advisable.

Do I pay VAT on affiliate income?
Only if your annual turnover exceeds the VAT registration threshold. Some affiliates register voluntarily to reclaim VAT on their expenses.

Can I claim home office expenses?
Yes, if part of your home is used exclusively for affiliate work, you can claim a portion of household expenses such as utilities or rent.

What if my commissions come from abroad?
You still must declare this income on your UK tax return. Double taxation relief may apply if you have already paid foreign tax.

Conclusion

Affiliate marketing is an accessible and rewarding way to earn income online — but it is not exempt from UK tax laws. Once your earnings grow beyond £1,000 per year, HMRC considers you self-employed, and you must declare your income and pay tax accordingly.

At Persona Finance, we specialise in supporting digital creators, influencers, and affiliate marketers. Our accountants ensure you stay compliant with HMRC while maximising your tax efficiency.
👉 Book a consultation today to discuss your affiliate tax setup and avoid unnecessary stress during Self Assessment season.