Musicians – It’s Time to Claim Back Your Tax!
As a musician starting up in business, you could be entitled to a Tax rebate for the amount of expenses you have incurred investing in your studio equipment. Whether you have purchased a mixer, set of turntables, microphones, guitars, speakers, computers and even software, these are all allowable items of deduction when calculating your profits or losses for UK Income Tax.
Whether you are a DJ, or songwriter, or a solo songwriter, just by registering as self-employed with HMRC and filing a Tax return can generate a sizeable repayment. Let’s take an example of a DJ.
Example Case Study: DJ House
DJ House has been working as a delivery driver for DHL for a number of years, paying Tax on his salary every month. As a hobby, also for several years he has been a DJ, recreationally playing for different online radio stations and building up his brand, including Soundcloud and Mixcloud profile.
After some consideration, he decides he has enough experience to quit his job at DHL and start looking for work as a DJ in Leeds as there are plenty of opportunities. He also has many friends in the industry that can help him get started.
He was able to claim back £2,847.80 back from HMRC
Following registration with HMRC, he files his first year’s Tax return which shows an opening trade loss of £14,239, mainly arising from everything that he spent developing his studio. These expenses included the purchase of a mixer, Technics turntables, CDJs, software, laptop and numerous track purchases from Beatport. This loss was carried back against his income earned three years ago (allowed by HMRC), resulting in an immediate Tax repayment of £2,847.80.
HMRC count any expenses incurred in the seven years prior to starting trade as being incurred on the first day of business. This applies to any trade, whether you work in construction, manage a retail shop or a freelancer. By creating a loss in the first year, you have many opportunities to apply for Tax relief and offset your loss against income for which you have already paid Tax upon.
Starting Business as a Musician
Registering as a self-employed musician is relatively straight forward and easy to administer on an annual basis. For the most common situations it involves completing form CWF1 and sending it to HMRC. After this, you are simply required to complete annual Self Assessment Tax Returns declaring your income and expenditure from all employments and trades.
At QuickRebates, we understand that this can be cumbersome for some people, perhaps maths is not your strong point. We have a saying:
“You do what you do best, and let us do what we do best”
What we mean by this is that you should be spending your time writing your next song, or planning your next gig, instead of being bogged down with Tax return computations. Furthermore, you should outsource the completion of your Tax rebate claim to a firm that will ensure they maximise your claim to the fullest possible extent. For self-employed musicians, there are many areas of expenses and allowances which you can claim. Not just this but HMRC also issue penalties for incorrect Tax returns so it’s important that you have the Tax return correctly prepared.
Claiming Tax Back for Producing Music
In the last ten years or so, there has been a great rise in home based music producers due to the evolution of music producing software such as:
- Logic Pro
- Garage Band
- Fruity Loops
This has generally allowed many music fans to create their own professional sounds, and in a lot of cases have their tracks professionally signed by independent record labels.
It’s an unknown fact that producers can register as self-employed and claim Tax back on their studio expenses. At QuickRebates we have worked with many musicians and appreciate the costs in developing and maintaining a studio can be enormous.
Are You a Singer, Vocalist or Songwriter?
If so, the rules do not change. Your self-employed trade as a musician is treated no differently to another self-employed trader and any losses that you have incurred can be offset against other income that has already been Taxed.
As a singer, you would probably have a laptop, recording hardware and software, you may use your own home as a studio / office. All of these expenses add up and increase the Taxable loss.
Hey. I work in a call centre, but also DJ in my spare time. I’ve had the odd gig here and there so almost semi-professional, am I entitled to make a claim? Reply
Absolutely. The fact that you already have gigs and earning money strengthens your claim. You can go back up to seven years when claiming costs, and there are multiple ways you can claim relief for those costs. Drop us a line as it looks like you could be due a Tax rebate. Reply
I’ve just started playing at my local club and I’ve spent a fortune on my DJ gear, literally thousands. I’ve never heard of this before? Reply
First of all, congratulations on your new position? Which club are you playing at?
Back to your question, this is quite a straight forward example of Tax relief from HMRC. If you start up in business self-employed, which you have, you can claim all of those expenses for seven years preceding your first day of self employment. Don’t forget you need to register with HMRC. You should either give them a call, or fill in form CWF1 and send it off.
Alternatively, if you need a hand, give us a shout and we’d be happy to help! Reply
It’s just a local club, nothing flash! Reply
Well, congratulations anyway! This could be the start of something bigger!
It’s a busy time of the year for HMRC at the moment, the Tax year has just passed and there’ll be a load of people trying to get their Tax rebates in early. We have an agent account with HMRC and could organise this on your behalf, registering as self-employed? Also, we could run through how much you would be entitled to? Reply
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