How an Online Gaming Income Could Affect Your Taxes

With today’s technology, many people are finding different interesting and innovative ways to earn money. With the digital age comes plenty of online opportunities and true enough, many are now earning money online. Some even have ways to earn money the way that many have been dreaming of like by playing online games.

In the United Kingdom, a person who receives donations on platforms like Twitch and YouTube, gets paid when participating in esports tournaments, or plays and streams real money earning games, will still need to pay tax as these are considered as incomes.

Earning from Online Gaming and Streaming

There are a few ways to earn money from online gaming. You can be a professional esports player who joins tournaments with prize pools. As an esports professional, you may also be hired as an employee of esports companies like Cloud 9 and Envy Gaming. When you’re a part of an esports clan or company, you’ll be paid in salary and earn money from sponsorships and winning tournaments.

If the pro scene isn’t up your alley, you still have the option to play games for entertainment and be a streamer on platforms like Twitch and YouTube. As a streamer, you can earn money from viewers and their donations as well as sponsorships. There are streamers with a huge following that also score a work contract with the platforms where they stream. They get paid to stream on these platforms exclusively like Twitch streamers Ninja and Shroud.

Now, when it comes to earning money by playing real money games or gambling online, gambling winnings are tax-free. This is also the case in other near countries like Scotland, Wales, North Ireland, and England. It may sound unfair but it’s because gambling companies in the UK are already paying taxes to the government. However, it is a different story if you’re in countries like the US, France, and Macau because casino winnings in these places are taxed between 1% to 25%.

If you’re an online streamer who plays and streams casino games on platforms like Twitch, then whatever you’re earning from streaming is taxable. What’s not taxable is the money you’ll get from the casino game you’re playing. Again, this is only the case if you’re in the UK and other countries where gambling winnings are tax-free.

When You Should Be Paying Tax

In the UK, as long as you’re earning less than £12,500 in a single tax year, you don’t have to pay any tax. People of all ages who are earning money in any way are taxed including minors. If you’re a minor who’s earning money online, your earnings are still taxable. You can just get the help of an adult or accountant to take care of your taxes.

A single tax year in the UK starts from April 6 to April 5. Earnings are calculated not only with your main source of income but also your wages from freelance work. This also includes the donations or tips you receive from platforms like Twitch, Buy Me a Coffee, and Patreon, and of course, your savings.
If you’re earning more than £12,500, you are required to pay the tax that is based on the amount that exceeds £12,500. This is why you must keep track of the money that you receive from your streams or the money that you win from playing in tournaments as a professional player.

It doesn’t matter if you’re also earning or getting money that is in a different currency. This income is still taxable and what you can do is to use the exchange rates available on the Her Majesty Revenue and Customs (HMRC) site to convert your earnings.

Now, if you’re a streamer who would sometimes go live for a charitable cause, then whatever you earn from that stream is tax-free. As long as you give all the earnings of that stream to your chosen charity. If you claim that you’re doing a charity stream and you fail to donate the money you earn from it, you can be charged for fraud.

You can also do a charity stream for yourself but you have to make sure that it is an official charity that is recognized by the Charity Commission in the UK. If not, then you’ll still have to include the earnings you get from this self-charity stream in the computation of your taxes.

When it comes to how much tax you should be paying, here’s a quick guide to help:

• Less than £12,500 – 0 or no tax to be paid
• Earnings between £12,501 and £50,000 – 20% tax
• Earnings between £50,001 and £150,000 – 40% tax
• Above £150,000 – 45% tax