Paying Tax

[thepurpleblob]

[quote name='leftybassman392' post='553994' date='Jul 28 2009, 02:35 PM']Any of a whole bunch of people that frequent this place can answer this for you, but since I seem to have got here first I'll make a start:-

If you are earning money (ANY significant money) by playing your instrument then you need to get yourself set up as a self-employed musician - I believe I'm still correct in saying that you should normally declare yourself as a sole trader. There are documents on the HMRC website that tell you how to do this.

It's important that you do it fairly soon if you plan a career as a musician. Others will be able to give you more details about why it's important.

As a self employed person you will get paid for the work you do. This is income.

You will incur costs in carrying out your business. This is expenditure.

Your expenditure can be offset against your income - there are two principal types: 1. revenue expenditure (broadly speaking, day-to-day costs such as fuel, strings, etc.); and 2. capital expenditure (broadly speaking, purchase costs of major items you need to conduct your business such as basses, amps & other large cost items.) How you do this can look incredibly complex if you read too many HMRC documents, but the basic idea is simple - if it's expensive and/or essential to your business then it's a capital item (you can't really be a bassist without a bass...), and if it's less expensive and incurred progressively over a period of time (fuel for your car for example) then it's a revenue item. There is a bit of a grey area on certain kinds of things, but in time you'll figure it out.

When you subtract all your expenses from your income what you have left is your profit. This is taxable. Whether you actually pay tax depends what your profit is. The calculation is done annually.

Others will no doubt fill in the gaps and correct the errors of detail that I've no doubt made.[/quote]

A good accountant will pay for themselves. You'll almost certainly know someone who has an accountant so you can get a personal recommendation. As long as you do all the sorting and adding up donkey work yourself your tax affairs should be simple, so it won't even cost much.

[leftybassman392]

[quote name='thepurpleblob' post='553999' date='Jul 28 2009, 02:39 PM']A good accountant will pay for themselves. You'll almost certainly know someone who has an accountant so you can get a personal recommendation. As long as you do all the sorting and adding up donkey work yourself your tax affairs should be simple, so it won't even cost much.[/quote]

+1 to that. Best to make sure you get someone who understands the music business (check out OldGit's post above).

One other thing - accountants are not all equal. I had a dozy mare once who managed to lose my entire accounts for a year. Eventually found them behind the sofa or something!! As has already been said, word of mouth is usually a good option.

Edited July 28, 2009 by leftybassman392

[ironside1966]

Any clarification would be really, really appreciated.
[/quote]

My advice will be get an accountant while you have the money and do everything above board a good one will advise well try to find one who is experienced with dealing with musicians.

If you get caught out once the tax man will never trust you again and may suspect you are still trying to cheat him even though you are been honest there is not only tax but NI contributions also.

[OldGit]

I can recommend someone in the South Wales area.

[fusionbassist1]

Thanx guys that's really helpful.

I do indeed know at least one person in my general area who's a musician with an accountant but any suggestions in the north wales (or there abouts) are would be a great help.

So i'm gonna set myself up as self employed then get me an accountant (which i must point out does indeed make me feel grown up ) and basically start being really anal about getting receipts for just about everything so to make the accountant's life easier and also save myself some money by not having him/her do it at a £50 an hour rate then i guess?

Do i need to collect all the receipts/invoices/etc i have knocking about from past jobs for any reason or just keep them in a safe place incase mr tax man decides he hates me at some point during my life?

Thanx again.

[thepurpleblob]

[quote name='fusionbassist1' post='554120' date='Jul 28 2009, 04:21 PM']Thanx guys that's really helpful.

I do indeed know at least one person in my general area who's a musician with an accountant but any suggestions in the north wales (or there abouts) are would be a great help.

So i'm gonna set myself up as self employed then get me an accountant (which i must point out does indeed make me feel grown up ) and basically start being really anal about getting receipts for just about everything so to make the accountant's life easier and also save myself some money by not having him/her do it at a £50 an hour rate then i guess?

Do i need to collect all the receipts/invoices/etc i have knocking about from past jobs for any reason or just keep them in a safe place incase mr tax man decides he hates me at some point during my life?

Thanx again.[/quote]

That's the first question you ask your accountant. I wouldn't throw anything away though

[OldGit]

[quote name='fusionbassist1' post='554120' date='Jul 28 2009, 04:21 PM']Thanx guys that's really helpful.

I do indeed know at least one person in my general area who's a musician with an accountant but any suggestions in the north wales (or there abouts) are would be a great help.

So i'm gonna set myself up as self employed then get me an accountant (which i must point out does indeed make me feel grown up ) and basically start being really anal about getting receipts for just about everything so to make the accountant's life easier and also save myself some money by not having him/her do it at a £50 an hour rate then i guess?

Do i need to collect all the receipts/invoices/etc i have knocking about from past jobs for any reason or just keep them in a safe place incase mr tax man decides he hates me at some point during my life?

Thanx again.[/quote]

You'll need to decide on a start date - ask your accountant when
But if you have a drawer full of receipts then you probably want to hang on to this year's and especially any for the hardware you are using - bass gear, computer, outlandish stage wardrobe, models of Stonehenge, special knobs that go up to 11, car, etc as these can be taken into consideration and written off over
the years, even if you owned them before.

Edited July 28, 2009 by OldGit

[leftybassman392]

[quote name='OldGit' post='554136' date='Jul 28 2009, 04:29 PM']You'll need to decide on a start date - ask your accountant when
But if you have a drawer full of receipts then you probably want to hang on to this year's and especially any for the hardware you are using - bass gear, computer, outlandish stage wardrobe, models of Stonehenge, special knobs that go up to 11, car, etc as these can be taken into consideration and written off over
the years, even if you owned them before.[/quote]

Excellent point. You don't need to shell out for new gear when you start the business cos your existing gear can be included when you do start up.

Oh, and one more thing - keeping receipts isn't anal - it's business. Chant it to yourself before you go to bed every night. Example; my business related fuel receipts for a year add up to nearly £1500. By claiming it I reduce my net profits by £1500 and my tax bill by around £300. Think about it.

Edited July 28, 2009 by leftybassman392

[fusionbassist1]

I guess i now know what must be done

I meant 'anal' in terms of how meticulous i need to be in terms of collecting and keeping receipts and for those kinds of savings it is clearly worth doing!

How does it work in terms of paying 'your' accountant as in is it an annual thing or a pay-them-when-you-use-them kind of basis?

[leftybassman392]

[quote name='fusionbassist1' post='554233' date='Jul 28 2009, 06:03 PM']I guess i now know what must be done

I meant 'anal' in terms of how meticulous i need to be in terms of collecting and keeping receipts and for those kinds of savings it is clearly worth doing!

How does it work in terms of paying 'your' accountant as in is it an annual thing or a pay-them-when-you-use-them kind of basis?[/quote]

Freelance accountants are self employed like you, so you pay them for the work they do

[fusionbassist1]

Ah ok so come the end of each financial year I'll just plonk a load of tidily arranged receipts on my accountant's desk, have them do their thing, pay and then be happy 'bout the money knocked off as expenditure?

I think I've got it now, all i plan to do is check out how to set myself up as self emplyed, talk to people I know who are self employed to get tips on keeping records etc and then also find me an accountant and see what i need to do to get them involved and when exactly i should do so.

Plan!

[OldGit]

[quote name='fusionbassist1' post='554315' date='Jul 28 2009, 07:19 PM']Ah ok so come the end of each financial year I'll just plonk a load of tidily arranged receipts on my accountant's desk, have them do their thing, pay and then be happy 'bout the money knocked off as expenditure?

I think I've got it now, all i plan to do is check out how to set myself up as self emplyed, talk to people I know who are self employed to get tips on keeping records etc and then also find me an accountant and see what i need to do to get them involved and when exactly i should do so.

Plan![/quote]


Ha ha well almost ... My accountant never actually sees the receipts. I just enter them into the spreadsheet and keep the paper in files in case Johnny Taxman wants to inspect them ...

[WalMan]

[quote name='fusionbassist1' post='554120' date='Jul 28 2009, 04:21 PM']Do i need to collect all the receipts/invoices/etc i have knocking about from past jobs for any reason or just keep them in a safe place incase mr tax man decides he hates me at some point during my life?[/quote]
Broadly yes.

If you have started self employment you must tell HMRC as soon as possible and register to pay Class 2 NIC's (£2.40/week). You can do this from the link at the bottom of [url="http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm"]THIS[/url] page. If you do not you will suffer a £100 penalty for failing to register.

Bear in mind that if you think the income you will earn after expenses will be less than £5,075 this year you can apply for the Small Earnings Exception and not pay Class 2

Have a read through the pages on HMRC site from [url="http://www.hmrc.gov.uk/startingup/"]HERE[/url]

Find an accountant - word of mouth is best. You may be able to get the first meeting free and can use that to find out [list]
[*]whether you get on,
[*]how much he thinks he might charge you,
[*]what he wants you to provide him with and in what format for him to stick to the quote, and
[*]whether he deals with other musos
[/list]
The last is not important, but if he does then he may have a better idea of the sort of relevant claims for musicians.

What you need to provide him with for him to stick to the quote IS. Keeping good records, well written up (in a book or spreadsheet, etc) will keep your costs down because he can easily extract the information he needs. Handing over a carrier bag stuffed with all the receipts you can find/managed to remember to keep is a nightmare for the accountant and will add to your bill.

Fees wise you will normally get an annual fee. Some might set a budget to be billed and paid throughout the year. Something for you to check at a meeting. Most accountants work on an hourly rate depending on the level of staff involved and will charge down time when they are working on your case. That then forms the basis of the bill (hence don't provide a carrier bag of receipts).

You [i]can[/i] phone HMRC helplines and ask for advise, BUT you would be better off using an accountant to get the right answer. And as I said before that is merely recognising the lowest common denominator HMRC have gone with in setting up the helplines. The person you speak to will have had very little training and often be following a script depending on what you ask (or what they think you have asked). If you get off the script they [i]should[/i] pass it up the line to a technical officer, but may give an off the cuff answer that is just plain wrong. Be very careful of any advice you receive from the call centres.

Edited July 28, 2009 by WalMan

[fusionbassist1]

Ok then.

I must admit amidst all this I have lost sight of why exactly i should declare myself officially self employed exept out of fear of being rodded my mr tax.

I guess that's just it though, i'm going to have to do it someday and i suppose it's time to be a grownup and realise not all my money's going to go into my pocket from now on....*sigh*

Anybody had any experience or advice in how to go about such things at 18 or should it really not matter as the whole tax ordeal is a learning curve i'm going to have to get through at some point in my life regardless?

Thanx once again for trawling through such a boring subject for my sake

[ironside1966]

[quote name='fusionbassist1' post='554447' date='Jul 28 2009, 09:22 PM']Ok then.

I must admit amidst all this I have lost sight of why exactly i should declare myself officially self employed exept out of fear of being rodded my mr tax.

I guess that's just it though, i'm going to have to do it someday and i suppose it's time to be a grownup and realise not all my money's going to go into my pocket from now on....*sigh*

Anybody had any experience or advice in how to go about such things at 18 or should it really not matter as the whole tax ordeal is a learning curve i'm going to have to get through at some point in my life regardless?

Thanx once again for trawling through such a boring subject for my sake [/quote]

Don’t worry a good accounted will help through it and answer all you questions, it is not hard you just need to keep on top of things.
When you are working with other people who are declaring tax it is highly likely that you will be implicated before long.
To make this simple if I run a band that has worked for the BBC ,the BBC will tell the tax man how much they paid me then I will declare how much I paid you, if they check me out they will find you.

Ps I have checked out your MySpace great playing and like the tone, is it only a cheap Washburn T bass

[fusionbassist1]

Thanx a lot and yeah those recordings where just done on a washburn that i routed and put DiMarzio pickups in but I no longer have the bass and don't use that account at all.

They where a set of ultrajazz pickups and I highly recommend them even though I'm not using them any more due to them leaving when i sold the washburn.

The recordings where from a few years ago I think, just DI at a friend's house.

Jazz bass all the way now

A guitarist i was with today pointed out also that any work I do for telly will involve passing on names and fees down to hmrc too.
Annoyingly i did a studio session for soem television series only last week so I better get on the case; i never thought twice why they wanted my National Insurance number.

Thanx once again everyone for pointing out how important the whole tax thang is and showing it's not THAT complicated.

[largo]

Coming to that time again ! I'm curious as to whether every honest, law-abiding BC'er pays tax on cash gigs ?