Free products you receive are income. Free products you send out are a cost. These are opposite sides of the ledger, and mixing them up is one of the most common mistakes we see on TikTok creator and seller returns.
If you both promote brands and run your own TikTok Shop, products flow in two directions. Brands send you things to review. You send your own stock out to other creators, to reviewers, or as samples. HMRC treats those two flows completely differently, and getting the direction wrong either inflates your tax bill or quietly understates it. This guide separates them cleanly, with worked numbers, for the 2026/27 tax year. It applies to England, Wales and Northern Ireland (Scotland sets its own income tax bands, but the trading rules here are UK-wide).
The one-line rule: which way is the product moving?
Before you touch your bookkeeping, ask a single question about any free product: did it come to you, or did it go out from you?
- Product received to review or promote = taxable income at market value. It is payment in kind for an advertising service. This sits on the income side of your accounts.
- Product (your own stock) you send out as a sample, seeding gift or review unit = a business cost or an inventory matter. It sits on the expense side, or it simply reduces your stock.
That direction test does almost all the work. The rest of this guide explains how to value each one, where it lands on your tax return, and the traps in between.
Side A: free products you RECEIVE are taxable income
When a brand sends you a product because it expects a post, a mention, a review or a tag, you are not really being given a gift. You are providing an advertising service and being paid in product instead of cash. HMRC taxes income in "money or money's worth", so the market value of that product is taxable trading income, even though no money moved.
We cover this in depth in our guide to tax on PR gifts for TikTok creators, including the "badges of trade" HMRC uses and the narrow cases where a genuinely unsolicited, no-strings item can fall outside your income. The short version: most PR products are physical, have a resale value and come with at least an implied expectation of coverage, so they count.
How to value a received product
Use the normal retail price a customer would have paid at the time you received it. A dated screenshot of the product listing is ideal evidence. That value goes into your gross trading income for the year, alongside cash fees, affiliate commission and your TikTok Shop sales.
This matters for the £1,000 trading allowance. The allowance is measured on gross income, and the taxable value of gifted products counts towards it. A creator who took no cash but received £1,400 of taxable PR products has £1,400 of gross trading income, over the limit, and must register for Self Assessment.
The cash-flow trap
HMRC will not accept tax paid in serum or trainers. You can owe income tax on the value of a product while having no cash from that product to pay the bill. Set money aside to cover the tax on anything gifted to you for promotion.
Side B: samples and stock you SEND OUT are a business cost
Now flip the direction. You run a TikTok Shop, and you send units of your own product to other creators to seed reviews, or you post out free samples to drum up sales. You are not earning income here. You are spending your own goods to market the business. That is an allowable business expense (or, more precisely, an inventory and cost-of-sales matter).
There is no "income" event when you give away your own stock. Instead, the cost works through your accounts in one of two ways:
- If you account on a cash basis (most small sole traders): you already deducted the cost of buying or making that stock when you paid for it. Giving a unit away free simply means you booked the cost and earned no sale against it, which is normal and allowable, provided it was for the business.
- If you use traditional (accruals) accounting with stock: the units you send out come out of closing stock and land in cost of sales or marketing/promotional costs. Either way the cost reduces your taxable profit.
The test is the same "wholly and exclusively" rule that governs all your other costs, which we set out in our guide to allowable expenses for TikTok creators. Stock sent out to win genuine business coverage passes. Stock you keep for yourself, or send to family as actual personal gifts, does not.
Postage and packaging count too
The postage, mailer bags, tissue paper and inserts you use to send those samples out are themselves allowable promotional costs. Keep the Royal Mail or courier receipts.
The VAT wrinkle on goods you give away
If you are VAT-registered, watch the business-gifts rule. When you give away your own goods for free, you generally have to account for output VAT on them unless the total value of gifts to the same person stays at or below £50 (excluding VAT) in any rolling 12-month period. Stay within £50 per recipient per year and no output VAT is due on the gift. Seed ten different creators one £30 item each and you are fine; send one creator £200 of product across the year and output VAT can bite on it. Most creators sending samples are not yet VAT-registered, so this only matters once your taxable turnover passes £90,000 on a rolling 12-month basis (the threshold since 1 April 2024). More on that threshold in our TikTok Shop VAT threshold guide.
Worked example: a creator who does both
Illustrative example (not a real client). Priya is a TikTok beauty creator who also sells her own candle range through TikTok Shop. In 2026/27 she:
- Receives PR boxes from three skincare brands, all expecting posts, retail value £900 in total.
- Earns £6,000 in cash brand fees and affiliate commission from UK brands.
- Makes £18,000 of TikTok Shop sales on her candles.
- Sends out 40 of her own candles (cost to her £6 each, retail £18 each) to other creators to seed reviews.
Side A, products received. The £900 of PR boxes is taxable trading income at market value. It goes into gross income alongside her £6,000 fees and £18,000 of shop sales.
Side B, candles sent out. The 40 candles cost her £240 to make (40 × £6). That £240 is a cost she has already incurred and deducted as stock; the giveaway is allowable promotion. She does not add the £720 retail value (40 × £18) as income, and she does not add it as an extra expense either. There is no sale, so there is no income; the only number that matters is the £240 she actually spent. She is not VAT-registered, so the £50 gift rule does not apply.
Her gross trading income for the allowance test is £900 + £6,000 + £18,000 = £24,900, well over £1,000, so Self Assessment is mandatory. Her candle cost of sales, the £240 of seeded units, postage and her other allowable expenses come off to give her taxable profit. If that profit lands at, say, £15,000, she pays 20% income tax on the slice above her £12,570 personal allowance, plus Class 4 National Insurance at 6% on profits between £12,570 and £50,270. Class 2 is not compulsory in 2026/27; because her profit is above the £7,105 Small Profits Threshold she gets a qualifying year for the State Pension with no Class 2 payment due.
The mistake to avoid: Priya must not record the £720 retail value of the candles she gave away as if it were income (it isn't, she never sold them), and she must not double-count the £900 of PR boxes as both income and a cost. Received product is income once; sent product is cost once.
The overlap trap: affiliate commission and where VAT sits
Many creators who receive product also earn affiliate commission, and the VAT treatment of that commission depends on who you bill. Commission billed to a UK-established business is standard-rated at 20% once you are VAT-registered, and it counts towards your £90,000 threshold. Commission billed to an overseas business, a Chinese or US seller, or an overseas TikTok entity, is outside the scope of UK VAT under the place-of-supply rule (B2B services are supplied where the customer belongs) and does not count towards the threshold. We unpack this fully in our guide to tax on TikTok affiliate commission. Note that the value of products you receive in kind is taxable income for income-tax purposes regardless of where the brand is based.
MTD and platform reporting: HMRC is already watching
Two background facts make accurate record-keeping non-negotiable. First, since 1 January 2024 platforms such as TikTok Shop must collect and report seller income and identity details to HMRC each year; 2025 figures were reported by 31 January 2026, and HMRC cross-checks them against your return. Those reports capture your shop payouts, not third-party PR products, so the duty to declare received gifts sits with you.
Second, Making Tax Digital for Income Tax is mandatory from 6 April 2026 for sole traders and landlords whose qualifying (gross) income is over £50,000, assessed on the 2024/25 return, with the threshold dropping to over £30,000 from April 2027 and over £20,000 from April 2028. If you are caught, you will keep digital records and send quarterly updates through MTD-compatible software, which makes a clean split between received-income and sent-cost even more important.
Quick reference: received vs sent
- Received to promote → taxable income at retail value → into gross trading income → counts towards the £1,000 trading allowance and the £90,000 VAT threshold.
- Sent out as your own stock → business cost / cost of sales at your cost, not retail → reduces taxable profit → watch the £50 business-gift VAT rule only if VAT-registered.
- Genuinely unsolicited, no-strings item you keep → may be outside income, but keep evidence it had no promotional condition.
Sources
- Tax-free allowances on property and trading income (gov.uk) — the £1,000 trading allowance.
- HMRC Business Income Manual BIM100210 — income in money's worth.
- VAT Notice 700/7: business promotions and the £50 business-gift rule (gov.uk).
- When to register for VAT — the £90,000 threshold (gov.uk).
- Making Tax Digital for Income Tax — who needs to sign up (gov.uk).
Frequently asked questions
Are the free products I receive to review taxable, even if I never sell them?
Yes, if a post, review or mention was expected in return. HMRC taxes income in money's worth, so the market value of the product is taxable trading income whether you use it, keep it or bin it. You owe tax on the value, not on whether you later sold it.
Do I add the value of stock I send out free to my income?
No. Goods you send out from your own business are not income, there is no sale. You only ever account for what those units cost you to buy or make, and that cost reduces your taxable profit as promotional spend or cost of sales. Do not record the retail value of giveaways as income.
Could I be taxed twice, once for receiving and once for sending?
Not on the same item. The two rules apply to two different flows. A product that came to you for promotion is counted once as income at its retail value. A product you sent out from your own stock is counted once as a cost at what you paid for it. The mistake is double-counting or putting a flow on the wrong side, not the rules themselves.
Does the £50 VAT business-gift rule apply if I'm not VAT-registered?
No. The output-VAT charge on free goods over £50 per person per year only applies once you are VAT-registered, which happens after your taxable turnover passes £90,000 on a rolling 12-month basis. Below that, you can seed samples without worrying about output VAT, though you still keep records of the cost.
