A Tax Guide For Musicians

What taxes do you submit as a musician? What exactly do you need to do to submit taxes? And what about expenses? If you’ve not had to deal with taxes and the and filing out the Self Assessment tax return as a musician before, it can be quite the maze to navigate.

Thankfully, we’ve put together this handy tax guide for musicians. It’ll take you through what you need to complete a tax return by 31st January, including:

• Registering as self-employed
• Figuring out your tax-deductible business expenses
• The tax and National Insurance to pay as a sole trader this tax year
• Why you don’t necessarily need accountancy services
• Submitting your income and expenses
• Calculating your tax bill and filing your tax return with software

Ultimately, through this guide for musicians, you’ll be able to easily register with HMRC and work out the amount of tax you’ll need to pay.

WHAT TYPES OF INCOME ARE TAXABLE AS A MUSICIAN?

There are two relevant types of income you can earn as a musician:

• Employment earnings
• Self-employed earnings, also known as ‘trading income’

If you’re only employed, then your employer is the one held accountable for deducting your tax and National Insurance Contributions (NICs). However, this responsibility will fall to you if you either earn over £100,000 in employment or have any other income that would require you to complete a tax return.

As well as self-employment earnings, ‘other income’ could include:

• Rental income
• Trust income
• Overseas income

HOW DO I REGISTER AS SELF-EMPLOYED?

If you’re self-employed, then you should tell HMRC (Her Majesty’s Revenue and Customs) as soon as possible. This needs to be done by the 5th October before the Self Assessment tax return deadline – the 31st January after the end of the given tax year.

For example, if you start working for yourself on 7th April 2022 you would need to register as self-employed by 5th October 2023. You would then file your return by either 31st October 2023 (in a paper format) or 31st January 2024 (in a digital format).

You can register with HMRC online. They will then send you confirmation of this, along with your Unique Taxpayer Reference (UTR) number.

It’s worth bearing in mind that while a paper tax return is currently an option for all, it may not be in the future. Making Tax Digital (MTD) for Income Tax is expected to be rolled out in April 2024, and would only allow those with a reason to be exempt to use non-digital record-keeping and returns.

WHAT DO I NEED TO DO IF I’M A SELF-EMPLOYED MUSICIAN?

On your Self Assessment tax return, you should list your income and expenses. You’ll be taxed on your profits, though how much this tax is will depend on how much you earn.

If your total income is under the Personal Allowance (£12,570), and your self-employed earnings are below the threshold for the relevant NICs, it may be that you don’t need to pay tax. HMRC has a tool to help check.

And if your self-employment income is below £1,000 (known as the ‘trading allowance’), whether you operated as a sole trader, limited company or partnership, then you might not be required to file a tax return. However, this does have to take into account other sources of income which aren’t related to employment, like trust income.

You pay your tax bill on the Self Assessment tax return deadline, though this is only for the first tax year. For each year afterwards, the likelihood is that you’ll pay it in two instalments – one on the 31st January, and the second on the 31st July (called the ‘second payment on account’).

You’ll pay Class 2 and 4 NICs, even if you’re also an employee and your employer deducts Class 1 NICs. Income Tax bands and NIC rates are subject to change every tax year.

WHAT EXPENSES ARE TAX-DEDUCTIBLE AS A MUSICIAN?

Being self-employed usually allows you to claim allowances and reliefs, which will reduce the amount of Income Tax you will be required to pay. These include any expenses for things used specifically for business purposes.

Expense categories include:

• Office – such as stationery
• Travel – including fuel, parking, and train and bus fares
• Clothing – such as stage uniforms and associated cleaning costs
• Music – including manuscripts and sheet music and arrangements
• Hire – such as those for recording facilities
• Staff – including salaries or subcontractor costs
• Commission – such as those paid out to agents
• Professional subscription – to a business-related magazine like Music Week, for example
• Financial – such as instrument insurance and repairs
• Inexpensive instrument replacement – more costly ones will involve capital allowances
• Business premises – including heating, for example
• Advertising or marketing – like ads for your work or a photo session
• Training – such as refresher courses
• Home-working – such as rent/mortgage interest and electricity bills

HOW DO I CLAIM EXPENSES AS A MUSICIAN?

To claim your expenses, include details like the amount and date. While you won’t be required to submit evidence of them, it’s advisable to hold on to all records and receipts that are related to your expenses for at least five years. This is in case HMRC requests them at a later point.

If your business expenses come to less than the £1,000 trading allowance, it may be beneficial to claim this relief instead – both financially and in terms of time.

You may need to separate business and private use for some expenses, and apportion amounts for things like mileage and home-working costs. It’s a good idea to have a business bank account to help keep records of business costs.

With some expenses, you might not have the receipts – but that doesn’t mean you can’t claim on them. Instead, you can estimate them. For example, you can log your mileage for a quarterly period, then use this as a basis for the annual claim. Or you could maintain a record and use HMRC’s ‘approved rate’.

HOW DO I FILE A TAX RETURN AS A MUSICIAN?

For your Self Assessment tax return, you would fill in the SA100 form, as well as any other pages relevant to you. You can also use tax return software to simplify this process.

Make sure to file on time as you may receive a penalty otherwise. You could potentially be able to appeal this if you have a reasonable excuse, or at least avoid any additional fines.

It’s possible that HMRC will open an enquiry into your case – usually within 12 months of you submitting your return. It’s worth noting that they can do so at random, not just if they suspect inaccuracies.

Record-keeping is extremely important. With an efficient system in place, you’ll be able to stay on top of your records and will find the whole process much simpler.

WHAT ELSE CAN I USE ASIDE FROM THIS TAX GUIDE FOR MUSICIANS?

Along with following this tax guide for musicians, we recommend submitting your tax return using software such as GoSimpleTax.

This software empowers you to file an accurate tax return all by yourself, without the need for the help of an accountant. It can automatically calculate the amount of tax you will need to pay throughout the year, plus offer potential ways of reducing your tax liability.

Now you know the income that’s taxable, how to register as a self-employed musician and your tax responsibilities, and how to claim for tax-deductible expenses. And you also know the most important thing – the easiest way to file your tax return: GoSimpleTax.

So turn to our tools today – getting started couldn’t be simpler. Have any questions? Contact us and our team would be happy to answer them.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.