Updated: Apr 14
I posted a version of this on our FREE OnlyFans but I thought it would be useful to share on our blog seeing as there is a kerfuffle surrounding VAT right now, and a lot of conflicting information. There seems to be so much confusion on the interwebs over the recent VAT change on OnlyFans, so hopefully this will clear some things up for everyone. Please be aware that I am not an accountant and this is just my basic understanding of everything (after speaking with my accountant).
💖WHAT IS VAT?💖
VAT stands for Value Added Tax and it is a legal requirement in the UK, where OnlyFans is based. All UK businesses that sell physical or digital goods and services have to pay 20% VAT on their GROSS income once they hit a threshold of £85,000. The government does not mess around with this and it is NOT something you can wiggle out of.
Previously, it looks like OnlyFans were taking VAT out of their 20% commission and creators were paying VAT on their own income once they hit the £85K threshold, but now the HMRC guidelines have changed making OnlyFans liable for the full amount. Because OnlyFans as a business has hit the threshold, VAT is due on ALL of their eligible products or services, regardless of whether an individual creator is VAT registered or not - it is the PRODUCT that is liable now, not the person. The extra 20% (charged to fans) is then paid to HMRC.
The UK isn't the only country to pay VAT, a lot of EU countries have it also and VAT varies from country to country (see the above infographic - it was the most recent one I could find).
In the US, VAT is known as SALES TAX (see above) and varies from state to state, and city to city. It is often added at checkout rather than being incorporated into the price. It is usually lower (roughly between 5-10%) and again, is not optional.
💖WHAT IS INCOME TAX? IS IT THE SAME AS VAT?💖
NO. I used to get these two mixed up for years, but VAT is DIFFERENT to income tax and we all have to pay income tax once we hit a threshold (in the UK) of £12,500. Once you hit that amount (or ideally before) you have to declare your income to HMRC and register as