Following ‘finfluencers’ advice can lead to disastrous results for taxpayers

Fiona Fernie, Partner said:

Although the Financial Conduct Authority (FCA) are cracking down on illegal financial advice on social media, thousands of so-called ‘finfluencers’ are still giving financial ‘advice’ online. These posts often suggest that they will help followers to ‘get rich quick’ or avoid significant amounts of tax, leading to potentially disastrous legal and financial results for those who follow their guidance.

I have seen a number of videos on YouTube and TikTok where finfluencers have suggested that certain types of income are not taxable. But in reality, there are circumstances where there are exceptions to this and you would need to pay tax, meaning following their advice will result in falling foul of the taxman and potentially a hefty fine from HMRC.

When advising on tax mitigation, you need to point out the ‘grey’ areas in the law where the basic, generally accepted rules do not apply. This is important because there are specific anti avoidance rules in the tax statute which can mean something becomes taxable if you are deemed to have abused the normal tax rules. This kind of specific, detailed advice cannot be adequately provided in a Tik-Tok video, YouTube Short or an Instagram reel which by their very nature are short and sharp.

Many of these finfluencers have no financial training or qualifications, and, equally as importantly, have no knowledge of the financial situations of the people they are targeting. Financial advice needs to be tailored to each individual’s circumstances, based on key factors such as their attitude to risk and how much they can afford to lose if the advice turns out to be ineffective or wrong. For those on lower incomes who do not have long term savings as a safety net, bad financial advice could be particularly ruinous.

Some finfluencers seem to have lavish lifestyles. But anyone watching these videos should remember the old adage ‘if it looks too good to be true it probably is.’ It is very easy to create the appearance of wealth on social media, or indeed, lie about your finances and in any event the source of any real wealth may not be from following the strategy being promoted.

Fiona added and warned:

Listening to finfluencers is the modern-day equivalent of taking your financial advice from a mate down the pub, but on social media it reaches an audience of millions who may not have enough financial experience to recognise when they are being misled by omitted or false information.

Would you like to know more?

If you would like to discuss any of the above, please speak to your usual Blick Rothenberg contact or Fiona Fernie using the form below.