Are footballers PAYE?

How are footballers taxed?

Football is one of the most popular sports in the UK and across the world. You may be aware that footballers are paid a lot of money for their craft, but do you know how they’re taxed? You might be surprised to learn that it’s not too different to you. Read below as we at TaxScouts unravel the topic.

What is PAYE?

Pay As You Earn is referred to as PAYE. It is the system used by employees to pay taxes. Contributions to national insurance and income tax are the two primary taxes you pay through PAYE. And before you ask, yes, these are taxes that must be paid.

Footballers are taxed through PAYE

Footballers are taxed just like regular employees. They have contracts which set out the terms and conditions of their employment, including details of their salary. Additionally, income tax and national insurance is deducted automatically from their wages before they receive it.

This is called PAYE which stands for pay as you earn. It is a system set up by HMRC in which employees pay income tax and national insurance automatically if they earn over the threshold of £12,570.

Employees on PAYE, including high-paid footballers, receive a payslip every month which includes a breakdown of their wages and deductions, pay tax based on how much income they make and are on a specific tax code - a code that helps employers work out how much income tax their employee has to pay.

Employers are responsible for deducting their employee’s tax and sending it to HMRC on their behalf.

Tax rates for footballers

Footballers pay tax based on how much they make, just like regular employees across the UK. Many footballers are PAYE high earners and earn well over £150,000 per year. This means they will fall into the highest tax bracket of 45% - officially known as the ‘additional rate’.

Here are the current income tax rates in the UK:

Tax for ads, sponsorships, and endorsements:

Although footballers’ wages are taxed through PAYE, their ads, sponsorships and endorsements are all considered self-employed income. Even if a footballer is representing the club or town they play for, this income isn’t reported through PAYE and therefore won’t be taxed automatically.

It’s very common for footballers to have several streams of income alongside their typical wages. Regardless of this, all self-employed income must be declared to HMRC through an annual Self Assessment tax return. This will let HMRC know how much self-employed income was generated across the tax year which will determine how much tax is due.

When filing a Self Assessment tax return, income from employment must also be reported, despite already being taxed through PAYE.

Tax for image rights

In football, your “image” is considered as your name, nickname, kit number, likeness, photographs, autographs, initials and more.

Anything that is used by companies relating to you as a footballer by way of endorsement deals is paid to the imaging rights company directly.

Image rights are a big part of a footballer’s income stream. Currently, image rights are only taxed at 19% corporation tax (instead of the 45% rate of income tax). This is very tax-efficient as a lesser amount of tax is being paid.

HMRC are accepting of properly structured image right contracts, however, they can sometimes decide that certain profits are subject to income tax as opposed to corporation tax. An example of this is if the footballer happens to be the director or shareholder of their image rights company. They would also likely receive a salary which will be subject to income tax

Who are TaxScouts?

TaxScouts is an online platform designed for one reason: to make taxes simple for everyone. Find out more about TaxScouts at www.taxscouts.com