Tax Guide for Professional Musicians
As a professional musician in the UK, whether you're just starting or you've been in the industry for years, understanding the tax system can feel overwhelming. It's important to get organised early to avoid any unwelcome surprises from HMRC (His Majesty’s Revenue & Customs). This guide will help break down the essentials, from understanding your income tax and National Insurance contributions to managing expenses if you're self-employed.
Table of Contents
Employment vs. Self-Employment
National Insurance Contributions
Dealing with Both Employment and Self-Employment
Understanding Taxable Income
In the UK, the standard personal allowance for the tax year 24/25 is £12,570. This means you won’t pay income tax on earnings up to this amount. However, once you exceed this threshold, tax is payable on every pound over it. Check the current threshold on the Government website.
What is Taxable?
Most income, including performance payments, teaching fees, or other professional services, is taxable. However, not all income is. Here are a few common types of non-taxable income:
- Grants and scholarships
- Gifts and inheritances
- Housing and council tax benefits
It’s crucial to note that bank interest is taxable, usually deducted before you receive it. If your total income is less than your personal allowance, you can complete a form to reclaim any tax already deducted.
Employment vs. Self-Employment
Employed Musicians
If you work for an employer (e.g., as a teacher in a school or as part of an orchestra), you'll be taxed under the Pay As You Earn (PAYE) system. This means tax is deducted directly from your salary before you receive it. Your employer uses a tax code issued by HMRC to calculate how much tax to withhold, and at the end of the tax year (5th April), any discrepancies will be adjusted.
In most cases, employed musicians can only claim tax relief on job-related expenses deemed "wholly, exclusively, and necessarily" for the job (e.g., violin strings for an orchestral player).
Self-Employed Musicians
Self-employed musicians – whether you're freelancing or teaching privately – are taxed differently. You don’t have an employer to deduct tax, so you must keep track of your income and expenses and submit these details to HMRC at the end of the tax year.
The major benefit of being self-employed is that you can claim expenses to reduce your taxable income. You'll need to keep detailed records, including receipts, invoices, and bank statements, as proof of your income and business expenses.
You’ll pay tax on your profits, not your gross earnings, so tracking expenses carefully is key to reducing your tax bill.
Paying Taxes as Self-Employed
When self-employed, you'll typically pay tax in two instalments each year:
- 31st January
- 31st July
Since your tax bill isn’t calculated until after the tax year ends, you’ll have time to prepare, but this also means you need to set aside money for it as you earn.
Common Allowable Expenses
As a self-employed musician, you can deduct business expenses from your income to reduce your tax bill. Some common examples include:
- Music, scores, CDs, and DVDs
- Instrument repairs and maintenance
- Concert attire (only for items not suitable for everyday wear)
- Travel and accommodation for work
- Concert tickets (if work-related)
- Phone and internet bills (business use)
- Professional memberships (e.g., Musicians’ Union)
Ensure you keep detailed records of your expenses, keeping in mind that personal expenses (like a suit for teaching or driving to a gig) are not fully deductible. Only the portion directly related to your business can be claimed.
Capital Expenditure
Large purchases like instruments or equipment are considered capital expenses. You may claim these as "capital allowances," spreading the cost over several years or deducting the full cost in one go if it's under the threshold. Check the current figures on the Government website.
Keeping Records
Whether you are employed, self-employed, or both, keeping accurate records is vital. HMRC requires self-employed people to maintain detailed records of both income and expenses. Without this, it’s hard to prepare accurate accounts, and incomplete records could result in overpaying taxes or facing fines.
You’ll need to track:
- All earnings (with payslips or invoices)
- Expenses (with receipts and invoices)
- Bank statements
Many musicians find it easiest to maintain a simple cash book or Excel spreadsheet to record income and outgoings.
National Insurance Contributions
As a musician, you also pay National Insurance Contributions (NICs). If you're employed, these are deducted by your employer. Self-employed musicians, on the other hand, pay the current NIC class required. See the Government website for the latest fees.
Dealing with Both Employment and Self-Employment
Many musicians find themselves both employed and self-employed. For example, you may freelance while also teaching at a school. In this case, your school will deduct tax under PAYE, while you file your self-employed earnings separately. Fortunately, any tax deducted by the school is credited towards your overall tax bill.
Hiring an Accountant
Though it’s possible to manage your taxes on your own, many self-employed musicians choose to hire an accountant. A good accountant can ensure you’re claiming all the allowances you’re entitled to, help with tricky calculations, and even communicate with HMRC on your behalf.
Ensure your accountant understands the music profession, as they’ll be more familiar with the specific expenses and income streams musicians deal with.
Registering as Self-Employed
If you decide to become self-employed, you must register with HMRC within three months of starting. Failing to do so could result in a fine. You can register online or by calling HMRC's self-employment line. Once registered, you’ll be sent a tax reference and start to pay NICs.
In Summary
Getting your taxes organised as a musician can be daunting, but with good record-keeping and a clear understanding of the rules, you can avoid nasty surprises. Whether you're employed, self-employed, or both, it pays to stay on top of your taxes early on. If you’re unsure about anything, consider seeking professional advice, and always keep track of your income and expenses to make your tax life easier.