Declaring your hobby to the taxman

[Cat Burrito]

I guess a lot of us here earn a bit of beer money from our various ventures. We've got pro players on Basschat & we have bedroom players too but I would imagine the majority are people with dayjobs who occasionally earn the odd quid playing with the band.

A lot of my gigs have been unpaid but I am now in a position where the band I'm currently with has potential to make a bit of money. Realistically speaking we might make a few hundred quid but it'll never be a case of packing in the dayjob.

Legally you are supposed to declare ALL earnings (I'm not naive enough to think most musicans do!) and some employers require you to declare music as a buisness interest.

I'm just curious as to who has declared what and if it has been a pain. I'm sure the taxman won't be delighted to see my putting down an addition annual income of £300 a year but my companies policy is it is declared.

What problems have people faced or has it been a relatively simple process? If people haven't declared, why not? Just wondering as I expect I am about to open a huge can of worms for myself. Also what tips are there for the semi pro musician? Presumably keep all receipts etc

[BassBod]

Self assessment - I do it online. Its really just a case of being very organised with your records, and realistic about your expenses.

I declare everything I earn (mainly gigs, some college teaching) and my significant expenses - mileage, consumables (strings and batteries) and sometimes a new suit for function gigs (where I make the most £). Unless you're very successful you won't pay tax on your musical earnings.

My ambition remains to earn enough (after expenses) to pay tax....funny world.....

[Bilbo]

TAxman told me that they are not really interested if you earn less than £1K. I declare everything to be above board (I am in Probation) so I don't compromise myself. In all honesty, when you take off your petrol at 40p per mile and all you gear, the profits are pitiful. I actually have got rebates more often than I have paid tax so I would declare if I were you. Its really easy to do on-line and doesn't take that long.

PM me if you want more detail on how to go about it.

[gjones]

For years I played a residency with a blues band in a bar. I have to admit, in those days, we were bad boys and didn't declare the money we made to the taxman.
One of the regulars there, who we got quite friendly with, was a big fan of the band and one night he asked if we would play a gig for his office Xmas Party. I said we'd be more than pleased to do the gig and, just out of curiosity asked where he worked. He replied "The Inland Revenue..........fraud dept" .

It was one of those moments where time stands still and you see your life flash before your eyes. The singers face went snow white and I thought he was going to have a seizure. He must have seen the look of abject horror on our faces and the penny must have dropped because he changed the subject and it was never spoken of again.

So the moral of this story is.........Karma will get you every time.

[stingrayPete1977]

I have thought about this too ,Last year for example shall we say a friend of mine lets call him Derek (Definitley not me and just happens to have all the exact same gear as me!).Well Derek plays in a few bands and probably earnt £1500-2000 with a few freebie charity do etc on top but also in that tax year had to buy a Genz-Benz rig,A pre EB Stingray bass plus stage clothing,Strings,Batteries and Petrol etc etc.So if I (sorry Derek) had declared that year as a loss would that be deductable against his regular job income? Hence making it very worthwhile as long as it never makes a profit, Which in all the years as far as I know Derek never has!

[Mr. Foxen]

[quote name='stingrayPete1977' post='897320' date='Jul 17 2010, 02:48 PM']I have thought about this too ,Last year for example shall we say a friend of mine lets call him Derek (Definitley not me and just happens to have all the exact same gear as me!).Well Derek plays in a few bands and probably earnt £1500-2000 with a few freebie charity do etc on top but also in that tax year had to buy a Genz-Benz rig,A pre EB Stingray bass plus stage clothing,Strings,Batteries and Petrol etc etc.So if I (sorry Derek) had declared that year as a loss would that be deductable against his regular job income? Hence making it very worthwhile as long as it never makes a profit, Which in all the years as far as I know Derek never has! [/quote]

Gear buying is capital, so you can claim for depreciation, not the whole cost, unless you blow it all up within a year.

[stingrayPete1977]

So if you buy Ashdown amps you could then!

[keeponehandloose]

So,am I right in saying that if done properly it would be quite easy to reduce the tax you pay on your regular income by offsetting musical expenses from paid gigs?
Double bass strings can be anything up to $220 and need to be changed about once a month!

[flyfisher]

I can't believe the taxman would allow any musical expenses to be offset against tax paid in a 'regular' job. I reckon they'd regard the music as a hobby (because you have another job for a living) until, perhaps, the 'hobby' starts to make actual income, whereupon they'd want their slice of that cake as well.

Otherwise, wouldn't everyone be claiming tax rebates for their 'hobbies'?

[Mog]

It depends on what you will be earning over a tax year. I know 90% of pub bands earn between €3,500 to €15,000 in a year but not many of them declare it. Two covers bands I know well have had to break up recently because the IR put the finger on them for unpaid taxes. One of these bands was averaging nearly 50k a year. Thats 10k per member. Not enough to be in the tax net over here but they didnt declare earnings as individuals so the band itself was done. IMO declare everything, its not that much work. It may take an hour at most. That way if serious money does start coming in its easy to update the info and claim tax relief, artists relief, loss of income benifit etc etc.

[Cat Burrito]

Thanks for the responses... Bilbo I may well PM you, thanks. I reckon I've earn't less than a grand in 10-15yrs but it's a requirement of my work to list business ventures (& in doing so be totally open & honest). I'm sure the taxman will be thinking "Give it up son!"

I'm also curious about the 200 people who looked at the thread but didn't post. Do they think this is being watched?

[crez5150]

As someone who has been Audited twice for band earnings.... I say regardless of how much you earn (unless its a paltry sum) DECLARE, DECLARE, DECLARE!!!!!

I paid £33 tax on my last tax return

[jazzyvee]

[quote name='crez5150' post='897583' date='Jul 17 2010, 08:37 PM']As someone who has been Audited twice for band earnings.... I say regardless of how much you earn (unless its a paltry sum) DECLARE, DECLARE, DECLARE!!!!!

I paid £33 tax on my last tax return[/quote]

I agree I declare all and include reciepts for everything, rehearsals, strings, cases etc etc. An artiste I worked with a few years ago had a tax audit and they went through his stuff then asked him a general comment about a specific music festival as if he was interested personally. The artiste replied yes that he has been there but never played there, at which point the tax man produced a poster from his briefcase listing the artiste as headlining the festival. you can imagine how thorough the rest of that audit went.

Its worth remembering from a tax point of view and also if you are on social security. Tax & DHSS people still have private lives and they could be at one of your gigs as a punter and recognise you when you sign on, ( again that has happened to a musician I've worked with), or get audited. So my view is that if you are doing something public like gigs are, it is safer to declare it pay your taxes and protect yourself from tax or DHSS fraud. If you are declaring you probably will not as you say end up paying much if any tax unless you are doing big stuff. I think my biggest tax bill for music was about £35 5 years ago on a good year when I was touring a lot. But then because I have a day job all my music earnings go back into upgrading, maintaining equipment etc. so I'm technically always running at a loss.

Jazzy vee

[dan670844]

[quote name='BurritoBass' post='896779' date='Jul 16 2010, 07:14 PM']I guess a lot of us here earn a bit of beer money from our various ventures. We've got pro players on Basschat & we have bedroom players too but I would imagine the majority are people with dayjobs who occasionally earn the odd quid playing with the band.

A lot of my gigs have been unpaid but I am now in a position where the band I'm currently with has potential to make a bit of money. Realistically speaking we might make a few hundred quid but it'll never be a case of packing in the dayjob.

Legally you are supposed to declare ALL earnings (I'm not naive enough to think most musicans do!) and some employers require you to declare music as a buisness interest.

I'm just curious as to who has declared what and if it has been a pain. I'm sure the taxman won't be delighted to see my putting down an addition annual income of £300 a year but my companies policy is it is declared.

What problems have people faced or has it been a relatively simple process? If people haven't declared, why not? Just wondering as I expect I am about to open a huge can of worms for myself. Also what tips are there for the semi pro musician? Presumably keep all receipts etc[/quote]

Get an accountant a good one! its worth it. This is very painful reminder hehehe........ I have got a massive interim payment to make by the end of July........ .it makes me weep........ The only advise I would give is get an accountant, they are well worth the money they will save you a lot more money than you will loose from their fees and always put a portion of the money you get in aside for tax. In the beginning (i was young) i didn't do this and had a hard time realizing the money wasn't all mine hehehe You wouldn't believe how many months you can live on baked beans, and I am ever indebted for all my friends who I blagged fags off when I smoked

[Cat Burrito]

[quote name='dan670844' post='898163' date='Jul 18 2010, 04:25 PM']Get an accountant a good one! its worth it.[/quote]

Do people generally think this is a good idea for £300 per year take home? Seems a bit OTT to me. I already spend a fair bit on insurance, petrol etc and this all seems to be another step towards sapping the fun out of what effectively is a hobby

[peted]

[quote name='BurritoBass' post='898231' date='Jul 18 2010, 05:51 PM']Do people generally think this is a good idea for £300 per year take home? Seems a bit OTT to me. I already spend a fair bit on insurance, petrol etc and this all seems to be another step towards sapping the fun out of what effectively is a hobby[/quote]
This is exactly what intrigues me - is it worth getting an Accountant when you're just earning a few hundred quid a year? What's the threshold?

[stingrayPete1977]

There is no threshold,Anything you earn should be declared but if its only a few quid and therefore only a few receipts to sort out then Im sure everyone on here would have a friend or family member that runs there own business that could sort it in the time it takes for you to boil a kettle a put a few biscuits out once a year?

[Cat Burrito]

Thanks Pete, that seems more realistic at my level.

My other question for anyone in the know is that most of my gigs are cash (if we get paid!) & no receipts / full details (ie Pete from the Red Lion paid me £30 for example). Surely such casualness isn't going to go down well?

[BassBod]

IF thats the deal, it should be fine. Everyone knows you won't be getting rich from pub gigs..even the Revenue. Just record what you were paid, the miles it took to get there and any other immediate expenses that were "necessarily incurred".

[hubrad]

I went 'official' yonks back when music became the main part of my income - touring pretty much full time, 5 or 6 days a week.. On leaving that band, I called the relevant offices and explained that, as I would be going back to a day job and music would be an occasionally paid hobby, I intended to wind up the self-employment.
The reply came that, as they now knew of my existence, they would prefer to keep it that way so keep on filling in the Tax Return.
Yes, indeed, if you make a loss on SE income (as paid musical work is categorised) you CAN claim that loss against tax already paid on other (SE or Employed) income. This worked very nicely for a few years, although these days I tend to pay some more tax as pretty busy these days.
Also HMRC changed the capital expenditure rules so now you can choose either to claim depreciation each year or the whole value this year. Just not both!
As the sound engineer in that full-time band said, as long as you have a vaguely arithmetical bent, accounts are really rather simple at our level - list of incomes and outgoings then one minus the other. I suppose the threshold of whether to pay an accountant is down to whether they will save you 1)enough time or stress, or 2)enough money due to knowing the System, to cover their fees. A friend recently got hassle from HMRC as his paid accountant had left some details out of the paperwork; when he told HMRC that it was down to the accountant, he was told in no uncertain terms that the responsibility lies with himself and the acocuntant is just there as a check. Any accountants aout there care to confirm or deny this, as my mate fits into category 1) above?
Personally I've always found my local HMRC people really helpful, same goes for the occasional call to their helplines.

[farmer61]

I spoke with a Chartered Tax Accountant (through my work) last year about this very subject, who stated that earnings from a hobby are not taxable.

However if the Tax man can prove that it is more than that then it is taxable. From that, and it was verified but a second source, I deducted that weekend warriors (those who play for beer money and gear) are safe.

For functions band charging several £k's per gig, I think it could be construed as more than a hobby therefore would declare away.

Btw O'Neills pubs ask for NI numbers on invoices. What do we feel about this from a data protection basis??

[WalMan]

[quote name='Mr. Foxen' post='897328' date='Jul 17 2010, 02:58 PM']Gear buying is capital, so you can claim for depreciation, not the whole cost, unless you blow it all up within a year.[/quote]
Well yes & no. You would claim the first £50k as a straight deduction - the Annual Investment Allowance - but remember that when you sell the gear you have claimed for theproceeds come back in as income, and if you stop your business/give up playing you need to value such items and bring the value in. So it's only a cashflow advantage for collectable/vintage amps & guitars
[quote name='farmer61' post='898747' date='Jul 19 2010, 11:19 AM']I spoke with a Chartered Tax Accountant (through my work) last year about this very subject, who stated that earnings from a hobby are not taxable.

However if the Tax man can prove that it is more than that then it is taxable. From that, and it was verified but a second source, I deducted that weekend warriors (those who play for beer money and gear) are safe.

For functions band charging several £k's per gig, I think it could be construed as more than a hobby therefore would declare away.

Btw O'Neills pubs ask for NI numbers on invoices. What do we feel about this from a data protection basis??[/quote]
That's about the size of it.

Pubs you probably should report, but there is likely to be a loss and after a few years of claiming losses HMRC would tell you it was a hobby and not allow you to set it off.

Function bands are more likely to be in the taxable bracket with income exceeding expenses

NI numbers, well that'll be because they are a large chain (Greene King pubs do as well) and their internal accountants will be more aware and have set it in stone as a requirement. Effectively they are self invoicing you and your NI number allows HMRC to link returns of payments to entertainers with the entertainers main tax record.

As above there is no limit. If you make a profit it should be returned, but make sure you claim all your expenses and if you look at the odd £30 pub gig with perhaps a 50-100 mile round trip then once you take account cost of travel, strings, batteries (obviously some changed more frequently than others), use of your home for personal practice, band r/h costs, phoning round for gigs, etc., then there is little left and at that level it's really no more than a hobby.

If you get sent a tax return for some other reason then you should at least acknowledge the fact that you gig, but possibly by adding a note in the "Other Income" section to the effect that you earn small sums as a musician, but it is really only a hobby and expenses regularly exceed income

Edited July 19, 2010 by WalMan

[stingrayPete1977]

So If I (erm sorry Derek) were to claim the pre EB stingray and Genz rig against this years takings I would get a rebate from my (Sorry his) everyday job?Thats how I see it and it appears the way but contradicts earlier posts? Obviously they would not allow it forever and the gear would belong to the company rather than...... er Derek?

[jakenewmanbass]

[quote name='stingrayPete1977' post='899157' date='Jul 19 2010, 05:29 PM']So If I (erm sorry Derek) were to claim the pre EB stingray and Genz rig against this years takings I would get a rebate from my (Sorry his) everyday job?Thats how I see it and it appears the way but contradicts earlier posts? Obviously they would not allow it forever and the gear would belong to the company rather than...... er Derek?[/quote]

I've known plenty of pro musicians that also do PAYE work in colleges and universities (including me at various times) even though I never got a rebate I got reductions in my self employed liability due to having already paid tax at source, plenty of the people I know DID get rebates because of the ratio of teaching to gig pay. I tended to gig more/teach less hence not getting a rebate. Some colleagues (on my advice) did the proper declaring 2 employments thing and got rebates of between 300-600 quid.
It's important to realise that the HMRC does not see your musical employment expenditure as claimable against your PAYE employment it's more that one employment will show a substantial liability and the other can even end up as a loss, or a very modest profit (unless like me you are a full time gigging musician, in which case it is from where your entire liability is derived) once the calculations for the 2 separate employments are made then the total liability is balanced between the two.
IME it is well worth being 100% above board with income declaration. For peace of mind AND as a part time muso it may well net you a little rebate...

Edited July 19, 2010 by jakesbass

[WalMan]

[quote name='stingrayPete1977' post='899157' date='Jul 19 2010, 05:29 PM']So If I (erm sorry Derek) were to claim the pre EB stingray and Genz rig against this years takings I would get a rebate from my (Sorry his) everyday job?Thats how I see it and it appears the way but contradicts earlier posts? Obviously they would not allow it forever and the gear would belong to the company rather than...... er Derek?[/quote]
Well possibly. You've got to convince HMRC you're carrying on your musician business commercially and expecting to make a profit at some point. Then if you spent £2k on the gear plus say £400 on other expenses but only took in £500 from gigs you have a potential loss of £1,900 to set against your other income

But again remember that if you sell the gear for £1.5k in a couple of years time, then that is income and taxed.

NOTE this is a VERY basic example with a lot of assumptions, but you get the gist?