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Part of Affiliate marketing tax UK: do you need to register for VAT?
Affiliate marketing tax UK: do you need to register for VAT?
HMRC self assessment and VAT registration for UK affiliate income, with the current GBP threshold, allowable expense rules and a worked example.
What to take away
- Affiliate commissions are taxable income in the UK, whether you earn from a blog, a comparison site or social posts.
- You usually report affiliate income through self assessment if your gross earnings exceed the £1,000 trading allowance.
- VAT registration is compulsory once rolling 12-month taxable turnover passes the threshold set by HMRC.
- Keep records for at least six years after the 31 January filing deadline, and take advice from a qualified accountant for your own case.
How HMRC treats affiliate income
Affiliate income is trading income when you earn commission regularly with the aim of making a profit. A one-off payment may be treated differently from a structured programme.
If you earn commission as an individual, report it on a self assessment tax return. You pay income tax on profits after allowable expenses, not on gross commission. National Insurance may also apply.
If you run the activity through a limited company, the company pays corporation tax on its profits. Company law duties are set out in the Companies Act 2006.
Self assessment: when you must file
You must register for self assessment if you have untaxed income above your trading allowance. HMRC's trading allowance for the 2026/27 tax year is £1,000. Check your total income from all sources before deciding.
Registration is not automatic. Tell HMRC about the new income, then file a return each year. Deadlines are 5 October to register, 31 October for paper returns and 31 January for online returns.
If you already file a return, add affiliate income to it. HMRC can charge penalties and interest for late or inaccurate returns. Commission rates vary, so our guide to average affiliate commission rates in the UK can help you forecast turnover before you cross a threshold.
VAT registration and the threshold
VAT is separate from income tax. You must register if rolling 12-month taxable turnover goes over the VAT registration threshold. The threshold can change, so check the current figure.
You can register voluntarily below the threshold. That may suit businesses that sell to VAT-registered customers and want to reclaim input VAT. It rarely suits a small affiliate publisher with consumer traffic.
Once registered, you charge VAT on taxable supplies and reclaim VAT on eligible purchases. The core rules sit in the Value Added Tax Act 1994. Late registration can trigger a penalty.
Allowable expenses and records
Allowable expenses are costs incurred wholly and exclusively for your affiliate business. Common examples include domain names, hosting, email software, analytics and paid ads. You can claim a proportion of home office and internet costs.
You cannot claim personal spending or client entertainment. Keep receipts, invoices and bank statements. A separate business bank account reduces the risk of mixing personal and business transactions.
If you use the trading allowance, you cannot deduct expenses as well. An accountant can confirm which approach fits. If you are new to the model, our guide to affiliate marketing for small businesses explains how to set up tracking and terms.
Worked example: sole trader affiliate income
This is illustrative only. It assumes a sole trader with £18,000 gross commission, £3,200 allowable expenses and no other income. Scotland has different income tax bands.
| Item | Amount | Notes | | Gross affiliate commission | £18,000 | All commissions received in the tax year | | Allowable expenses | £3,200 | Hosting, ads, software, home office share | | Taxable profit | £14,800 | Gross minus allowable expenses | | Income tax and NI | Illustrative | Depends on personal allowance and other income |
The table shows why records matter. A £3,200 expense claim reduces taxable profit by the same amount. At the basic rate, that saves £640 in income tax before National Insurance.
If turnover crosses the VAT threshold, you must add VAT to invoices and file returns. That can reduce margin if customers cannot reclaim VAT. Plan ahead.
Common questions
Do I need to register for VAT if I earn under the threshold?
No, registration is not compulsory below the threshold unless you expect to exceed it in the next 30 days. You can register voluntarily, but that brings VAT returns and may affect pricing.
Can I claim expenses against affiliate income?
Yes, if the expense is wholly and exclusively for your affiliate business. Keep receipts and a clear record of any home office share. If you use the trading allowance, you cannot claim expenses as well.
Do I pay tax on affiliate income if I have a full-time job?
You may. Your personal allowance covers some income, but affiliate profits sit on top of your salary. If the total exceeds your allowance, report it through self assessment.
Should I set up a limited company for affiliate marketing?
It depends on profit levels, how you take money out and your attitude to public filing. A limited company pays corporation tax and must file accounts at Companies House. Ask an accountant to compare the total tax and admin cost.