How are Olympians taxed?

Following the conclusion of the Paris 2024 Olympics and the commencement of Paralympics last week, audiences around the globe have been captivated. Whilst many of us hope that the athletes return in Los Angeles in 2028, achieving this requires not only perseverance, skill, and talent but also significant financial support. 

Whilst most countries offer substantial cash prizes for medallists, Great Britain are one of the few that do not. Instead, Team GB provides grants prior to the Olympics, to support athletes’ training. This means that some athletes must find other ways of funding their Olympic dream. For instance, long-jumper Jacob Fincham-Dukes balances his athletic career with a full-time job in health and safety compliance. Other athletes sign personal sponsorship deals, wear branded clothing or secure advertising endorsements; whilst some rely on the generosity of family and friends to cover the associated costs.

Nowadays, it seems that even a gold medal does not automatically guarantee financial stability. According to the BBC, Team GB rower, Georgie Brayshaw, who took home gold in the women’s quadruple sculls, says she has not been approached by any brands offering sponsorship deals or endorsements. 

Some athletes are continuing to discover new ways to exploit their talent, with many taking to social media to document their journeys and increase their earnings. For example, ex-Team GB gymnast Nile Wilson started a YouTube channel to help fund his training, which now has over 1.6 million subscribers. The official Olympics TikTok account has seen an increase in followers during the Paris Olympics, from 8.5 million followers at the start of the games to 15 million at present. This highlights the rise in social media engagement and means we could see a further shift towards athletes building their own platforms for additional funding. 

Like the rest of us, athletes also need to take into consideration the tax imposed on their earnings. From a UK perspective, athletes are taxed differently depending on whether they are carrying on a “trade” or pursuing a “hobby”. Prominent athletes are likely to be taxed on their income as if engaged in a trade, subjecting them to income tax and National Insurance contributions (NICs) on their earnings.

However, despite occasional payments and funding, some athletes may be regarded as pursuing a hobby. This means that, whilst the earnings would still likely be subject to income tax, they may be exempt from NICs. The distinction between a hobby and a trade, in the eyes of HMRC, is very much a question of fact. Simply declaring that you are an amateur athlete will not be enough to report your earnings as miscellaneous income. 

Certain high-profile athletes establish their own personal service companies (PSC). By operating through a PSC, athletes can reduce their tax liability by forming contracts to receive earnings via the company, incurring corporation tax rather than income tax. Additional income tax may arise when income is later drawn from the PSC. However, athletes can decide to only withdraw the funds they require, leaving the excess for future provisions. 

Athletes can also look to minimise their taxable income by claiming relevant expenses. Typically, athletes can deduct costs incurred directly related to their sports pursuits, such as equipment, coaching, and travel for competitions. However, expenses with dual benefit, such as medical care, physiotherapy, and nutrition, may not always qualify for full tax relief. 

The varying income streams received by athletes and the tax legislation imposed by HMRC means that their affairs are far from clear-cut, but more so a photo-finish. It is therefore important athletes seek professional tax advice to ensure their finances are managed correctly.