Provided with help from accountants LB Group, Chartered Accountants, Business Advisers, Chartered Tax Advisers (lbgroupltd.com) here we set out a list of the most common expenses you may claim against taxable income. The information provided here is correct up to the point of going to print. For up-to-date guidance please see HMRC.
The general rule is that self-employed musicians may claim against tax expenses incurred “wholly and exclusively” in carrying out their business.
These expenses include:
Travel expenses, including the cost of travelling to concerts and other performances you give and to schools and pupils’ homes to teach; you should remember to include the costs of travel and subsistence while on tour and travel and other expenses incurred attending interviews and auditions; if your business base is away from your home, you cannot claim for travel between your home and your work base.
- for travel expenses in your car, you may claim your actual business petrol costs and the proportion of repairs, maintenance, tax, insurance and other costs which relate to your business use of your vehicle
- alternatively, you may make a standard rate claim of 45p per mile for the first 10,000 business miles and 25p per business mile thereafter
- whichever basis you choose, you cannot change it until you change your vehicle
- you should keep a record of your business mileage whichever basis you choose. If you decide to claim on the basis of actual vehicle expenses, you will also need to keep records of and receipts for all expenses relating to your vehicle, including petrol and other running and repair costs
- if you choose the simplified standard rate basis, you will not be able to claim any capital allowance for that vehicle.
Use of your home for teaching or as an office:
- if a proportion of your home is used solely for carrying out your business (in other words, it is not used for any other purposes at all), you can claim a proportion of your home insurance, council tax, mortgage interest, rent and repairs and maintenance. Care must be taken in respect of the capital gains tax and business rates implications of such claims
- you can also claim a reasonable estimate of your heating, light and power costs that relate to your business even if no part of your house is solely used for your work, for example if you do your bookkeeping at home and/or you use a room for teaching in the day but for personal use in the evening
- alternatively, under the simplified expenses system you can simply claim a flat expenses rate set by HMRC for each hour you work at home each month. The flat rate you can claim for business use of your home varies with the number of hours you work at home. It is £10 for each month in which you work between 25 and 50 hours at home, £18 for each month where your home working is between 51 and 100 hours and £26 for each month when you work more than 100 hours at home
- remember these home working hours includes not only the services (lessons etc) you provide on your premises but also the time you spend there on other business-related activities (e.g. lesson preparation, maintaining your business records, marketing and developing your business etc)
- if you choose the simplified expenses basis, you still need to keep a record of the number of hours you work at home.
Other expenses you may claim against tax include:
- costs of hiring premises, such as teaching studios, village halls and theatres: this includes any room hire charges at schools where you teach agents’ fees
- fees paid by you to other musicians whom you engage
- costs of books, sheet music and recordings needed in the course of your work or bought for resale, for example to your pupils
- repairs/tuning/parts and insurance costs for instruments used in business
- general administrative expenses, such as stationery and postage
- costs of work-related phone calls and broadband
- advertising, including website costs and the cost of making promotional recordings
- bank charges on a business account
- subscriptions to professional journals and magazines
- the business proportion of loan interest for the purchase of a capital asset (such as an instrument)
- bad debts written off (including unpaid performance and tuition fees)
- accountant’s fees and other professional fees (such as legal fees) that relate to your business
- subscriptions to the ISM and a few other HMRC-approved professional bodies
- the cost of tickets to concerts you attend as part of your work
- continuing professional development (but not initial training costs)
- professional indemnity and other business-related insurances
- costs of clothing, costumes and props bought and used solely for your work (such as for a film, stage, TV or live concert performance), and laundry and cleaning costs relating to these items and
- costs of grooming, such as hairdressing and make up, for making ‘personal appearances’ the sole purpose of which is to promote/undertake your business activities.
You may also claim capital allowances on the purchase cost of assets used in your business: this includes instruments, computers and desks. Only the business element of the cost can be claimed. Capital allowances rules are constantly changing and you should obtain specific professional advice about this.
Should I adopt the simplified expenses system?
You may opt for the simplified expenses alternative if you are a sole trader or ordinary partnership and you work for 25 hours or more a month from home. This option is not available to limited companies or limited liability partnerships.
The simplified expenses system is easier to operate than the traditional actual costs basis because it requires less record-keeping on your part and you do not have to calculate the proportion of your total costs which is business-related. However, it may not necessarily mean a lower tax bill. For an estimate of which system for claiming expenses is better for you, use HMRC’s simplified expenses checker.
If you work on an employed basis your ability to claim expenses against tax is much more limited. Rather than the ‘wholly and exclusively’ rule which applies to self-employed expenses, the rule for employed work is ‘wholly, exclusively and necessarily’ for the performance of your duties:
ISM members have access to a free tax helpline (01275 376038 (for members in the UK)) which is staffed by experts who can help with any tax issue.