Why transfer window could be a tax issue for footballers
As the end of the transfer window approaches, once again many young international footballers have relocated to England, with considerable salaries now in their pockets. For instance, Chelsea’s pair of teenage summer signings, Jorrel Hato and William Estevao, joined with reported salaries worth a combined £180,000.
While these contracts mark the sudden arrival of significant wealth for many young players, they also mean many will encounter the UK’s tax system for the first time. Combined with limited experience of managing high earnings, this can create a steep financial learning curve, one for which players are frequently ill-equipped.
Pressing financial concerns
Every player’s circumstance is different and many players, particularly those from humble backgrounds, may not be well prepared for the substantial rise to their income.
For one, players are immediately a target for those looking to take a cut of the earnings with more unsavoury intentions. Agents are, in the main, a force for good, protecting and manoeuvring young athletes through fame, however, this is not always the case.
Social media is another more recent concern, and public engagement is inextricably entwined with brand and reputation, and therefore financial earnings. It’s an issue compounded by the cultural expectations that many footballers often face: a frequent understanding that flash belongings – cars, watches or clothes – are part and parcel of a footballer’s profile, with little long-term consideration.
Tax considerations for footballers
Another overlooked concern is that high-earning footballers are no different to any other high-net-worth individual (HNWI), and of course subject to the same tax considerations, an area of significant recent reform. Premier League footballers are unlikely to be au fait with the UK’s Foreign Income and Gains regime, but as athletes tend to be more itinerant, the new four-year FIG window could prove far more attractive for athletes than any other HNW individuals.
Image rights have also emerged as a key area of importance for players, especially following the Autumn Budget, with those footballers benefitting from setting up relevant companies impacted by intended legislation that all image rights payments related to employment are treated as taxable income from 2027. While football was not explicitly named, it was clear where this reform was targeted.
Preventative steps
Clubs are taking the financial concerns of players far more seriously, and there are generally more player care professionals permeating the sport, supporting personal and financial welfare. But this can go further, and there are areas of importance beyond the remit of clubs.
For a start, education on budgeting and managing money cannot be understated. An initial education of the requirements of taxed income would also immediately reap rewards, before broadening understanding to other taxable benefits.
The crucial overarching consideration for players is the fundamental importance of long-term planning. A serious injury is no longer a death knell for a career, but for younger players at important junctures in development, an achilles tear severely damages future earning potential. Judicious and prudent financial planning is a sound start to guard against financial difficulty, however a career may turn out.
The recent coverage of the “V11” group of footballers spanning the 1990s and 2000s who lost the entirety of their incomes because of poor investment advice and financial vulnerability has made clear the risks at play if athletes are not surrounded by good advice. We’ve recently partnered with the Rugby Players Association to pursue similar outcomes in rugby, where salaries are lower and injury risk is even more present.
High profile players in particular must have a good team around them, across agent, lawyer, accountant and investment adviser, with sufficient due diligence afforded at every turn.
Tom Wilson is head of sport at HaysMac