Tips for freelance musicians to help keep on top of your finances

Keep good records

We all get busy, but sit down once a month or at least once a quarter, and keep track of your income and outgoings. Having the last 3 months in recent memory makes it far quicker and easier than looking back 15 months after the event, by which time paperwork is often lost or missing.

Don’t ignore tax

The biggest common problem in paying tax is people burying their head in the sand and hoping it will go away. A good accountant will help ease the headache of tax. Don’t build it up and think of it as a huge challenge. Basically, you only need to keep track of your income and expenses (see above). If you get into the habit of tidying up your records quickly after the year end in May or June, you can file your return early, and have six months to save for any surprising January bill. Filing early also means that the enquiry window on your return closes earlier, as HMRC now only have 12 months from your filing date to enquire into the return – I suspect they are fully aware that the people who file early tend to have more accurate returns.

Buying/selling an asset (eg a musical instrument)

The Annual Investment Allowance allows you to claim the full cost of any asset purchased, in the tax year you buy it, for quicker tax relief (As a Covid-19 concession, the limit has temporarily risen to £1 million for assets purchased from January 2019 to December 2020). If you sell an instrument, any amount previously claimed can be clawed back by HMRC as a balancing charge, up to the value you sell it for or the amount you previously claimed, whichever is smaller. These allowances are intended for large value equipment which will be used for several years in your business and end up having nil value. However, if you buy an instrument as an investment and have an expectation that the value will rise, it may not be appropriate to claim allowances.

Invoicing

This is basically a bill from you to a client for services rendered; but it also allows your client to keep up-to-date records of their financial outlay. That is why it is usually (but not always) bigger organisations, or organisations with finance and payroll departments, that ask for them. You can make one up yourself – there is no official form or format – but it should contain: your name (or business name); address and postcode; contact numbers; email address; an invoice number (a unique number identifying that invoice); invoice date; name and address of client; a list of services or goods you have provided, plus a price per item; amount of VAT added (if appropriate); total amount due; your bank details (if the payment is to be made by bank transfer – quick and easy, and usually the preferred method these days).

Contracts and negotiations

The Musicians’ Union (www.musiciansunion.org.uk) is strong in its advice to members that they should get some kind of written confirmation of all engagements. Better still, that they should use one of its standard live contracts (downloadable from the members only part of the MU website). A similar service is provided by the Incorporated Society of Musicians (www.ism.org). This advice is particularly relevant if you are performing for businesses/individuals who work outside the music profession (e.g. weddings, corporate functions and so on). Don’t be worried about frightening off potential clients: they may well be unfamiliar with booking musicians; knowing exactly what you are providing them with will give them reassurance.

Unpaid fees.

Both the MU and ISM provide a legal service to help their members to recover unpaid fees, and the MU publishes a list of promoters that musicians should be wary of (its ‘Ask Us First’ service). These tend to be less well-known promoters, or businesses/individuals working generally outside the music profession. Fortunately, most music organisations are reliable – but not all, so do be wary and try to get at least an email confirmation including details of the gig. (It isn’t really usual to send contracts for one-off dates with small organisations like choral societies and local orchestras – see payment terms below)

Check when you will get paid

For a one-off event such as appearing with a choral society or local orchestra,  you might ask to be paid on the day. Be prepared: there will be occasions where payment is late, so it’s worth having wording for a simple chasing email drafted ready to send. Better to send this in the first instance, and try a polite phone call or two, before bringing in the heavy artillery.

VAT

If you earn over a certain amount (currently £85,000), you are required to register to pay VAT. Basically, this means you need to charge the people who pay you an extra percentage, but you can also claim back the VAT you pay for any goods or services you buy as part of your business.