Tax is the only other thing that is certain, see Benjamin Franklin for further details.
There have been many forests pulped to document the multitude of rules in the British tax regime and I recommend that should you find yourself subject to any of them, you consult a specialist accountant.
Individual circumstances can vary widely and this article is intended only to give a broad overview, not specific tax advice. However, it is intended to introduce tax to those unfamiliar with it and give some guidance for anyone completing a Self-Assessment Tax Return. Please note that the information given below is based on the current tax system and details of rates and allowances may change from time to time.
So, let’s get down to it.
When people ask us about tax, they are generally referring to Income Tax. As the name suggests Income Tax is a tax on income (who’d a guessed?)
Ways of Paying Income Tax
Those with a job, being paid through PAYE (Pay as You Earn), pay income tax every time a payslip is generated by their employer; the payslip itemises taxes paid alongside other details of how the wage or salary has been calculated. If your only income is from PAYE you will not (usually) need to complete a Self‑Assessment Tax Return.
Directors of a Limited Company should refer to the Company accountant in respect of taxes. This article does not concern itself with the complexity of Director’s taxes. Please see LINK for further information for Company Directors.
The self-employed and freelancers pay income tax based on an annual Self-Assessment Tax Return.
The Self-Employed and Freelance workers
If you are self-employed or a freelance worker, you should complete an annual Self-Assessment Tax Return. This is a declaration of your financial affairs that is used to produce your Taxable Profit.
Taxable Profit is income minus expenses
On a Self-Assessment Tax Return you record your income from self-employment activities in the Sole-Trade schedule.
You also record the expenses you incur in your Self-Employment Activities in this section.
Expenses are the costs you incur as a result of your self-employed activities. Before income tax liabilities are calculated, the total amount of your expenses is deducted from your income.
Knowing what expenses you can (and importantly, what you cannot) deduct from your income means that you pay the correct amount of tax due; HMRC is happy and we all have our tax money invested into the NHS, schools, roads the Arts Council and the other public services the government spends it on.
Expenses are specific to each individual and will vary from year to year. As an artistic professional you are likely to incur expenses that are outside the accepted list of expenses for those in more traditional businesses. Remember that expenses declared on your tax return should be “wholly and exclusively” incurred as a result of your business activity.
Members click here for a list of allowable expenses
In addition to Self-Employment you may have other sources of taxable income such as:
- Wages received under a PAYE employment (if you are both employed and self‑employed)
- Dividends received from any shares you may own (if dividends are more than £2,000)
- Bank interest (if more than£1,000)
These are recorded in separate schedules on the Self-Assessment Tax Return. Dividend and interest should be declared even if they are below the taxable threshold.
Every individual has an annual allowance. This is an amount that can be earned before any tax is due.
The current annual allowance is £12,500, so if your taxable income is below this figure, no income tax will be due.
When you complete your Self-Assessment Tax Return online, the calculation of tax due is done for you. You just need to ensure that you have filled in all the boxes correctly.
As a cross reference the calculation is:
Taxable income = Income – allowable expenses + other income – annual allowance
Tax due = taxable income * Income tax rate (currently 20% at basic rate)
National Insurance Contributions
In addition to income tax, National Insurance Contributions are also due on taxable income. There are separate and different annual allowances and rates for National Insurance Contributions. On completion of an online Self-Assessment Tax Return, the amount of Nation Insurance Contribution will be calculated.
This subject is covered in more depth in our seminar “Introduction to Taxes”, please look out for the next scheduled session here.
If you have any questions about anything in the article, we will be delighted to answer them for you. Please contact us by phone, email or post. Contact Details
Administration and Business Costs
- Agent’s commission
- DBS Checks
- Accountant’s fees
- Subscriptions to professional organisations such as Equity
- Subscriptions to industry magazines and forums
- PRS fees & Royalties
- Stationery, advertising, brochures & programmes
- Internet connection
- Business mobile
- Proportion of business use of landline telephone
- Photographs, promotional videos and headshots
Activity based expenses
- Hire of rehearsal studio and performance venue
- Dental work beyond the normal needs of health
- Deputies and accompanists (exclude deputies for an employment)
- Laundering and dry cleaning
- Research assistance and materials
- Tickets for cinema, concerts, opera, theatre for research
- Stage appearance expenses such as performance specific contact lenses or glasses; these must not be your everyday eyewear
- Hairdressing, cosmetics, make up remover
Body, Health & Wellbeing
- Throat spray and lozenges
- Fitness costs if related specifically to a role
- Physical treatments related to performance activities
- Bulbs & fuses
- Locks & keys
- Plugs & leads
- Computer consumables and external hard drives used for back-ups
- Software Licences fees
- Recording equipment
- Musical instrument insurance
Motoring Expenses – car or motorcycle
- Log the total business mileage for each vehicle
- Breakdown subscription/insurance
- Car hire
- Fuel allowance paid to colleagues
- Vehicle repairs, servicing, MOT and top-up fluids
- Motor insurance
- Parking fees for business activities
- Toll charges
- Road fund licence (aka road tax)
- Bicycle repairs, maintenance, consumables and insurance
Tour and Other Travel Expenses
- Hotel accommodation on tour
- Tour luggage and toiletries
- Subsistence – you are allowed to claim the cost of all meals when on overseas engagements. Only claim the cost of the evening meals when on tour in the UK and daytime meals incurred on business travel
- Travel insurance
- Travel cancellation fees
- Travel visas
To repeat my warning, this document is intended only as a guide; if you have any questions about any of your expenses you should consult an accountant or speak to a member of the Jozara team who will be able to help.