Helping tax feel less taxing: A self-employed musician’s guide to tax

This article was originally published in our Summer 2023 issue. Click here to subscribe to our quarterly print magazine and be the first to read our Summer issue features.

Trevor Ford is the sort of chap you would want at your side when facing the annual end-of-tax-year carrier bag full of forgotten invoices and impenetrable receipts. He’s handled the tax a­ffairs of more than 300 freelance musicians and, perhaps more remarkably, he studied flute at the Royal Academy of Music. Now, after enjoying a career as a freelance orchestral musician, working for recording, television and film companies, providing musicians for backing tracks, signature tunes, library music, and TV and feature films, he works primarily as a concert promoter.

All but the fortunate few musicians coming out of conservatoires today are going to have a portfolio career and, while getting booked may be at the top of the priority list, keeping the accounts under control absolutely needs to be up there too.

It was in his role as a professor at Guildhall that Ford captured the attention of undergraduates by catchily telling them he was going to teach them how to (legally) pay less tax, but from the start he is clear about the need to be honest. ‘Unless you turn out to be a total failure or decide that you can live on earnings of less than £12,570 a year, you are going to end up paying tax at some time in your life. It makes sense to get everything organised now, rather than waiting until it may be too late: the problem won’t go away, and many young musicians get themselves into a terrible mess by trying to ignore the whole issue – until HM Revenue & Customs (HMRC) catches up with them.

Find the flow: Andy Levett encourages musicians to embrace accounting to avoid issues caused by inconsistent income

‘Don’t try to pay less tax than you should by falsifying your accounts. You must declare all the money you earn, whether in cash, by cheque or by bank transfer. Being paid in cash doesn’t mean that a tax inspector won’t go to your engager later and ask for a list of musicians who were booked.

A tax inspector can ask to see your teaching diary and can contact your private pupils and require them to swear under oath to the number of lessons they have paid you for. ‘If you claim expenses you haven’t incurred, your accounts will look unrealistic, and you may find yourself cornered by a bright tax inspector who has noticed that, on a declared income of only £15,000, you have managed to buy a new car, rent a flat for £300 a week, pay off­ an old overdraft, and accumulate £2,000 in a savings account – HMRC looks at your lifestyle, not just your business activities.

‘It’s perfectly reasonable to want to pay no more tax than you really have to, but doing this by being dishonest can get you into a lot of trouble – and you won’t sleep at night.’

Andy Levett, principal at accountancy firm HW Fisher, points out that musicians often have an inconsistent income, with large gaps between paid work. ‘This can paint a financial picture which creates seemingly unfair tax payments and that may look unappealing to lenders.

So it’s important to apply the allowable accounting and tax treatment which best alleviates the position where possible.’

Post-Brexit, international performers face administrative burdens and possible tax deductions in the overseas countries they perform in. ‘It’s important to check these at the earliest stage possible so the correct paperwork is in place to mitigate deductions,’ says Levett.

As is the case for the self-employed in most professions, the biggest issue now is communicating with HMRC. ‘There are long waiting times because of backlogs,’ says Levett. ‘My best advice is to start keeping records of your income and outgoings from the moment you start trading. This should ideally be on a digital cloud app, such as Xero, QBO, FreeAgent etc. ‘HMRC’s Making Tax Digital strategy will soon require all businesses to keep digital records,’ he explains. ‘Knowing and complying with any requirements from the start is a lot easier than dealing with them in hindsight.’

Jonathan Robinson is the founder and director of ThinkMusic, a music business research consultancy and project management company. He ran a programme of music business advice mentoring for more than 500 musicians funded by Help Musicians, and continues to advise professional, career musicians.

‘As a freelancer, you are your own micro business,’ he says, ‘and getting into that mindset is arguably key to forging a career that brings abundance and financial independence, as much as it does enable artistic freedom and career progression.’

Robinson recommends Creative Money (www.creativemoney.co.uk), a website which provides financial guidance for creative professionals. Many freelancers concentrate on their day-to-day revenue expenses to the detriment of capital expenditure and the cost of equipment, such as instruments and office equipment.

‘Under the present regulations, new equipment costing up to £1,000,000 can be deducted from your profits in any one tax year – and this should be enough to keep most musicians happy,’ says Ford. ‘However, you can choose not to claim in the year of purchase (if, for example, your taxable profit is already below the tax threshold), or you can claim just enough to bring your income down to a level where there is no tax to pay.

In both cases, the unused costs can be carried forward and used in later years.’ These are not areas for the uninitiated, so the final wise words go to Trevor Ford. ‘It is not always easy to find a good, reasonably priced accountant’ he says. ‘If your accountant knows little or nothing about the music profession, they are unlikely to be able to advise you on what you can and can’t claim, and won’t be familiar with the various orchestras, opera companies etc for whom you may work.

‘If you go to a big City firm, you will almost certainly be looked after by a relatively junior member of staff (even though you may be ushered into the presence of a partner at your first meeting), and you will pay a small fortune for the privilege. Unfortunately, some accountants think of self-employed individuals as a quick way of making easy money, so make sure your accountant is prepared to spend time helping you, rather than just producing accounts as fast as possible every year without asking you any questions.

‘If you don’t receive replies to e-mails and messages, if someone different deals with you every time you telephone, if you keep finding mistakes, or if your bill seems high for no good reason, go somewhere else. Above all, remember that you are employing your accountant, and that they need you more than you need them. The ideal accountant works for a small or medium-sized firm, knows the music profession, and takes a genuine personal interest in saving you money.

Accountant Trevor Ford says the biggest advantage of being self-employed is that all expenses incurred in being a professional musician can be deducted from your earnings before your taxable income is worked out. The ‘necessarily’ rule, which prevents employed people claiming most expenses, doesn’t apply, and HMRC can only challenge whether an expense is really business-related – hence the regular arguments about such things as hairdressing and concert tickets. Tax inspectors do not have the power to tell you how to run your business, and they cannot tell you that you could have spent less on your expenses: if you choose to travel first class when you go to a gig by train, then that’s up to you.

‘Needles can be found in haystacks!’ There is no approved list of allowable expenses, but the following are the most commonly claimed:

• Music, scores and music books
• CDs, DVDs and downloads
• Instrument repairs, strings, reeds and tuning
• Payments to deputies
• Fees paid to an accompanist, coach or repetiteur
• Travelling expenses
• Hotels and meals
• Car expenses
• Concert clothing
• Hairdressing and make-up
• Laundry and dry cleaning
• Insurance
• Telephone (both your landline and your mobile)
• Diary service
• Broadband and e-mail subscriptions
• Postage and stationery
• Advertising and publicity (including website design and webhosting)
• Agent’s commission
• Professional and union subscriptions
• Concert tickets
• Music journals and magazines
• Courses and conferences
• Loan interest
• Accountant’s fees
• Studio costs (either renting a studio, or maintaining a music room at
• home – in which case a proportion of your rent or mortgage interest,
• council tax, home insurance, heat and light can be claimed)

(More details on the HW Fisher website at www.hwfi sher.co.uk/publications/musicians-tax-guide-2022)