A study by EY based on 21/22 tax year showed that Premier League players and staff contributed £1.7bn in tax, with the Premier League and its clubs combined contributing £4.2bn in total during the year.
£1.7bn is a significant amount of money from a small number of people. It was around 0.4% of the UK total for that year. HMRC figures shows it received a total of £731.1bn in income tax and £392.7bn in NI in 21/22.
Footballers, and especially agents, are criticised not just for how much they are paid, but how they get paid. As Rachel Reeves prepares for some big changes to taxation, here’s how tax is paid in top-flight football at the moment.
Income Tax and National Insurance (NI)
Player wages are subject to income tax and NI like any other, and Premier League players will be paying the top rate of tax at 45% for all earnings over £125,000. 888 Sport estimate that for 24/25 season the average Premier League player earns £300, 000 per month. They are paid weekly, so the 45% tax rate will kick in within a fortnight for most.
Image rights are often quoted as a way around this. As they are not paid for work i.e. playing football, they are not subject to income tax or NI through PAYE, and are typically paid into a company owned by the player, so subject to corporation tax instead. There are some controls over misuse of this, however. HMRC guidance sets out an expectation that this should be no more than 20% of a player’s total earnings (this was previous a rule rather than guidance) and ‘demonstrably based in commercial reality’. The obligation is on the club to ensure that this isn’t tax evasion.
Corporation Tax
Most Premier League clubs are loss making, so corporation tax is arguably a peripheral issue. It will certainly be a very modest amount of the total tax haul.
This is despite the Premier League’s spectacular success in growing revenues. From its inception in 1992 to the end of the 22/23 season, Premier League revenues grew by 2800%. CPI grew by 112% in the same period. The ‘top six’ - Manchester City, Manchester United, Liverpool, Chelsea, Arsenal and Tottenham – dominate revenue statistics in 22/23 due to bigger stadiums and consistent Champions League appearances. They were also the top six spenders on player wages.
Analysis by football finance expert Kieran Maguire shows in 22/23 17 of the 20 Premier League clubs recorded a pre-tax loss, and with transfer fees removed from the figures, only Brentford recorded a profit. Combined losses amounted to around £1bn.
VAT
Premier League football clubs generate a huge amount of VAT. Tickets, TV rights, food and beverages and merchandise are all VATable supplies. What’s not so obvious is that VAT is applied to transfer fees. VAT is applied to the whole transfer fee, whether it’s paid in one go or instalments. Contingent fees, such as those based on numbers of appearances, are only subject to VAT when they are triggered.
The VAT payable on transfer fees is huge, because transfer fees are huge. They can be offset against the considerable amounts of VAT payable, including any fees received from selling a player, so the net impact is diminished considerably, but it can create cashflow issues. Players won’t be registered with their new club until the VAT is paid, which is done via the Premier League.
Agents’ fees are also subject to tax, and there is some controversy around tax treatment. Dan Neidle, of Tax Policy Associates, has been heavily critical of ‘dual representation’ whereby agents represent both the player and the club. The club then deducts the agent’s fees apportioned to them from its corporation tax bill. Others argue this is legitimate as there is a clear service being paid for by the club. HMRC’s guidance, which was updated this year, states that they do not see a 50/50 split of agent fees between club and player as fair, given the main benefit is to the player. Premier League clubs spent £409.5m on agent fees in the 12 months to February 2024.
International Issues
Reclaiming VAT on international transfer fees can be difficult in some jurisdictions, although it is typically not a problem in the EU.
Moving to a country with a more favourable tax rate, such as Saudi Arabia is a major consideration for players. Footballers enjoy tax free income in Saudi Arabia, but if they return to the UK within a full tax year their income will taxed on the whole amount. If they quickly decide don’t like Saudi Arabia, they are likely to want to find somewhere else to play outside the UK until that year is up. Looking at you, Jordan Henderson.
One concern the Premier League may have around tax increases is the new UEFA financial controls on player costs, which are replacing Financial Fair Play. Under the rules, which are being phased in and fully implemented from the 25/26 season, clubs in UEFA competitions can only spend 70% of revenue on player wages, transfers and agent fees, gross of tax. This means that the higher tax burden on Premier League clubs the less competitive they might be in European competitions. There seems to be a solution to this, however. UEFA have a tax adjustment measure which can be used by clubs on request in ‘territories with excessively high tax rates.’
Conclusion
With some much money washing around football, from owners, to players and even CEOs and managers, there will be plenty more personal tax issues for them to worry about after the budget is announced beyond those above. They all have enormous wealth and we haven’t touched on the personal implications of IHT or CGT changes, just those specific to the day job. They are ‘working people’ after all.