It takes a lot to be a musician. All those hours of effort in learning your instrument or training your voice (or both). Booking gigs, selling tickets, recording songs, distribution. Finding an agent, finding a label, angling for radio airtime…

It takes a lot. Add in travel, and practising, and songwriting, and there’s no time left over for everyone’s least favourite part of the music scene.

Tax.

There’s a reason that songs like Taxman and Sunny Afternoon aren’t very complimentary about the revenue. It’s because the last thing any musician wants to worry about is filing a return, working out expenses, or unravelling all the paperwork that goes into gigging abroad.

What can be put on expenses?

Being a musician is hard work, sure. But do you know what else it is? Expensive.

All that travel, all that equipment, all the costs of spending weeks or months on the road. And things like studio time aren’t cheap either.

But it’s your job. And if you spend money for your job, you’re entitled to claim it as expenses on your tax return to lower your annual bills. Sure, you still have to pay tax on your earnings, but you can get some relief by expensing some of your outgoings.

You can put the following on expenses, so make sure you keep all the receipts:

You can even claim capital allowances on musical instruments you owned before you became self-employed, or that you received as a gift. Just let the Penny Ledger team know (but we’ll get to that later).

What can’t be expensed?

If you’ve spotted the word costume on that list and thought “well, I play in a t-shirt and jeans and my wardrobe’s chock-full of them” beware.

Because clothing’s a bit of a sore spot when it comes to tax. You can claim for stage wear “only if they could not reasonably form part of your daily wardrobe.” Same goes for make-up.

If you take to the stage looking like Gene Simmons from Kiss or Lady Gaga in her disco-ball costume, you can claim it. But you’ll have less luck if you’re trying to expense your latest Vinted purchases.

If you record at home, you can claim a percentage of your bills back. But trying to convince HMRC that an entire three bed end terrace is a music venue will likely lead to you paying fines. If you use one room out of a three bedroom house to record, you can probably claim around a fifth of your bills as expenses, but ask an expert to check.

Another potential pitfall is “entertaining business contacts.” The revenue has clamped down on people claiming when they drink or eat with colleagues or associates, so having six jager bombs with the bassist before you go on stage isn’t going to drive down your tax bill.

What about gigging abroad?

When you play gigs abroad, things can start to get complicated. The Musicians Union suggests getting your promoter to cover things like travel expenses and insurance so that they’re responsible for all the tax implications of that side of things. But bear in mind they’ll need to take out up to a third of your gross performance fee as what’s called a Withholding Tax.

They’re not pulling a fast one – it’s a legal requirement.

Most foreign income will be taxed in the same way as UK income, but it can get complicated

The full tax implications will depend on where exactly you’re performing. You’re expected to pay UK income tax on foreign income earned in the EU, Switzerland, Norway, Iceland or Liechtenstein – and get a certificate from HMRC to exempt you from paying local social security contributions.

In the USA, tax laws change from state to state, so you need to speak to someone who knows what you need to pay locally and how it’ll affect your UK tax return.

Basically, if you’re gigging abroad, speak to an expert.

What do you need to do about your tax?

Lets make this as simple as possible. Here are the things you need to do.

You have the talent to make it big and top the charts, but we have the know-how to make sure your tax returns are filed correctly so you’re not at risk of fines and overpayments. Isn’t it time you called us to tune up your tax returns?