Paying tax

[Rik (ESA)]

Evening all, looking for some general guidance re. tax as a musician... To be clear, I work a 9-5 job as my main source of income, but just lately our band are getting some regular gigs in the calendar. Question is, how do we go about this from a) a tax perspective and as a business. We are a four piece cover band with several weddings in the calendar which will return more money than an average pub gig, so we need to act now...

All opinions welcome (apart from anyone who might tell me to keep quiet!).

Thanks in advance.

[fretmeister]

Get an accountant.

[Bassnut62]

Register self-employed and write off cost of your equipment over 5 years to offset tax on earnings. If you're clever you might make enough losses to get a tax rebate on your day job. You can charge other expenses like transport too.
If you're serious about making it a business, don't forget to get your gear PAT-tested and carry PL insurance.

Edited May 12, 2015 by Bassnut62

[EBS_freak]

OK, from just being a player point of view, go self employed. You'll have to pay class 2 NIC and obviously be taxed on the earnings. The plus side is that you get tax relief on tools and expenses - e.g. mileage, basses, amps, mobile phone costs, insurance, etc... etc... Paying tax can be good because it gives you tax relief on your whole income if you start buying stuff - you can end up with a rebate at the end of the year. But remember... selling stuff also has an implication...

With regards to being a business, you could have one person that runs the band as the business and pays the others as contractors... There is a disadvantage to this.... so.... OR you could all form a business with you as directors. Advantage of this is that you can pay yourself dividends which is more tax efficient. HOWEVER, make sure you draw up a a shareholders agreement that stipulates that if a member of the band no longer plays in the band, they have to relinquish the shares. Nobody likes a squatter expecting dividends.

I'm not sure of how much money you are expected to earn but you may want to be wary of the VAT threshold. You may want to deliberately stay beneath that. There's ways around this but I'm not qualified to advise on this.

In short, get yourself an accountant - they may seem expensive but they will save you far more than you will pay them.

Hope this helps.

Oh - and do your books as you go along. Much easier than trying to do it at the end of the year...

Edited May 12, 2015 by EBS_freak

[Rik (ESA)]

Very helpful all, thank you - accountant it looks to be!

[warwickhunt]

Lots LOTS of ifs/buts to this and every individual will be... individual. Some years back I was in a band (weekend covers band £200-£250 shared 4 ways, playing once a week most weeks) where the guitarist was a solicitor and he had to declare earnings etc. After he/we ran the 2nd year at a loss (fuel/accountant/equipment inc strings etc.), the tax man basically said that we were hobbyists and we couldn't go claiming more back from the tax man than we were actually meant to pay! It pays to look into it, you may be pleasantly surprised but at least you'll have done the right thing.

[TimR]

Surely you can't be self employed if you're paying PAYE and working an employer.

Keep all your receipts and records of how much you've been paid for gigs.

Talk to an accountant or CAB.

It's very unlikely that you'll actually make much money out of music by the time all your outgoings have been included.

[Bassnut62]

You can work a day job as an employee, paying PAYE and have a business of your own on the side; but be clear about the boundaries of each job and whose time you are working on. Some employers may not want you working so hard at being a muso that you're too knackered to do the day job.

Re tax in this situation, you would definitely need an accountant to complete an annual tax return, which will now include employed income and PAYE, and self-employed income & expenses. You can usually get away with about 5 years of running losses on the band (after all expenses, incl depreciation on equipment purchased), before HMRC will consider you're muso business to be a failure and you just a hobbyist trying to offset his hobby against tax!

In an ideal world of course you will make money at the muso business (even after all expenses) and you will of course have to pay tax on the net profits.

Being on this exact road, I would say that it will probably take 3-4 years at least to start turning any kind of real profit and if we do that, we will have been very lucky. I am running the band as a self-employed person (on top of an employed day job) and paying the musos as sub-contractors. I will not pay anyone, unless they provide a proper invoice with NI number if necessary.

One thing to bear in mind is that if you are trying to get proper paying function gigs, your client will be given a lot of confidence to deal with a properly registered business or self-employed person, who works to a contract, provides a proper invoice, carries PL insurance, is fully PAT tested, etc. In fact many will not deal with anyobody that does not do this.

Guess I better get back to the day job......

Edited May 13, 2015 by Bassnut62

[Nicko]

Theres some further discussion here [url="http://basschat.co.uk/topic/256518-tax-avoidance-and-evasion/page__fromsearch__1"]http://basschat.co.uk/topic/256518-tax-avoidance-and-evasion/page__fromsearch__1[/url]

[bassace]

Some posters have made this a bit complicated, I fear. Here's what you do, and what I've been doing for the past umpteen years.

Keep a scrupulous record of your income and expenses for each gig. I have mine on a spreadsheet. Income is what you receive as an individual, your share of the gig money. Outgoings will include travel at .45p a mile, any accommodation/subsistence, instrument insurance and misc expenses such as leads, batteries etc. Also don't forget to claim for travel to rehearsals and associated costs. Then at the end of the year see how much 'profit' you've made. At the end of the tax year ask HMRC for a short tax return form. It's, er, quite short - four pages in fact. You'll need to put down all your PAYE stuff and your employer should be able to help you with that, P11D and P60 for instance. On page three you'll be asked to account for any misc income and capital gains. That's where you declare your band earnings.

Just as a PS, will you have to pay contribute towards band expenses, PA for instance. Here I suggest you record your gig money net, ie what you get after bunging in for the gear. If you bring shared equipment into your accounts it could get needlessly complicated and when/if you sell any gear you'd have to declare income on that. So best leave it out.

When you become a world beating band it'll be different of course but hope this helps for now. BTW I account for all my music income, cash and all. Most cash payments are accounted for by someone along the line. The only fireproof cash payment is that which comes out of the bride's father's pocket.

[RJ87]

What Bassace said!

And you can do it online too, I'm employed full time but declare income from weekend jobs etc. It takes all of 10 mins to do, just make sure you have your P60 handy!

Assuming you work full time and earn over you tax free allowance it basically boils down to 2 boxes, income and expenditure. You pay tax at 20% on the difference.

Personally I work on the theory if you give the tax man something, it'll keep him happy and off your case! ;-)

[Rik (ESA)]

Brilliant, all very helpful responses very much appreciated, cheers, plenty to go on!

[Bassman Steve]

Bassace is spot on. Easy enough to run at a loss (I usually am).

[bassace]

What I managed to omit is that if you do make a loss or break even, then no need to submit a short tax form. Obvious, really, but as others have said, don't try to put your losses against your other income. Keep things simple and, besides, the taxman won't be very impressed.

[Bassman Steve]

Indeed. I wasn't in the Inland Revenue (at the time) but my time in Customs and Excise taught me that tax is very much a matter of brownie points. Play fair and they'll bend over backwards to help you but try and take the pi$$ and they won;t rest until they get you.

[TimR]

[quote name='bassace' timestamp='1431586248' post='2772744']
What I managed to omit is that if you do make a loss or break even, then no need to submit a short tax form. Obvious, really, but as others have said, don't try to put your losses against your [b]other income[/b]. Keep things simple and, besides, the taxman won't be very impressed.
[/quote]


Yes. You must keep your bass playing income/expenditure under one umbrella.

You can't claim a loss and then try and claim PAYE back. That's not part of the deal.