How much tax do footballers pay?
- TBA
- Jul 26, 2024
- 3 min read
I’m sure you’ve all heard about how footballers are paid an extraordinary sum of money to show off their skills. Have you ever wondered whether they pay tax, and if so, how much they need to pay?
In the UK, all football players who sign contracts with clubs are considered employees, so players must pay taxes directly to the HMRC through their clubs.
Just like working in an office, taxes are deducted from your salary before you even receive it.
1. Where do footballers make their money?
Where do players’ incomes come from? Generally, from the following sources:
Match Participation
Whether on the field or on the bench, whether as a substitute or injured, footballers are usually paid income for participation. This is however based on individual contracts – it might state that pay is only given for actual participation.
Image Rights Income
Image rights are a significant part of a football player’s income. Simply put, any company using anything related to you through endorsement deals directly pays the image rights company. Currently, image rights are taxed at 19% corporation tax, rather than the standard income tax, which many see as a way to save on taxes.
Advertising, Sponsorships and Endorsements
Such income is considered self-employed income. While players can represent their clubs or towns, they can’t declare this income through PAYE.
2. Tax implications
A study by RIFT suggests that without creative tax-saving measures, England football players in any given year would end up paying around £2.676 billion in income tax and £197,711 in National Insurance annually, totalling £2.874 billion. If they could reside in a tax-free country, they would save a substantial amount.
RIFT analysed the total tax payments of the current England squad, revealing who pays the most to HMRC, and Raheem Sterling tops the list. With an estimated annual salary of £16.9 million, he is the highest-paid player in England’s 2022 World Cup squad, paying £8.143 million in taxes annually.
Jack Grealish also isn’t far behind, paying £7.515 million in taxes on his £15.6 million salary. John Stones (paying £6.261 million) is the only other player with an annual tax bill over £6 million.
3. What are the consequences of not paying tax correctly?
Tax issues can be very tricky. Although many young footballers earn enough to warrant strict scrutiny, few receive proper legal advice and support to handle their taxes correctly, and not necessarily in the UK!
Several major cases in recent years have made headlines, detailing footballers violating tax laws. In 2016, Lionel Messi and his father Jorge were convicted of tax fraud by the Spanish government, receiving a 21-month suspended sentence (later reduced to a €252,000 fine) and were forced to repay €5 million in taxes.
Although similar high-risk cases have not occurred in the UK, HMRC is looking to crack down on tax avoidance related to image rights. Currently, 329 professional footballers, 31 clubs, and 91 agents are under investigation, up from 93 the previous year.
HMRC’s new team focuses on tax avoidance related to image rights. Clubs pay extra fees for endorsements using players’ images, sometimes paying companies set up by players instead of the individuals. Companies are taxed at 19%, while high earners are taxed at 45%.
HMRC views the football industry as a high-income sector with significant unpaid taxes. Over the past seven years, HMRC has collected an additional £560 million in football-related taxes. Last year, 93 footballers, nine clubs, and 23 agents were investigated for nearly £56 million in unpaid taxes.
TB Accountants would like to emphasise the importance of ensuring that you are up to date with your taxes. If you are concerned or have any questions surrounding tax, we highly recommend seeking professional advice. We may even be able to help you reduce your tax burden by assessing your personal situation.