SELF ASSESSMENT AND TAX
It’s an exciting moment when you become a professional working actor and earn money for an acting job. However it’s important to remember to fulfil the requirements of the business side of your career such as registering as self-employed, keeping accounts, completing self assessment and paying tax.
This may sound daunting but after your first tax year you’ll be an old hand and for now we have some tips to get you started. That said, when it comes to tax and self assessment there aren’t really tips as such, more rules! So, these are our “must dos” for actors who are self-employed:
Register as self-employed.
No matter how old you are, if you are earning money working as an actor you must register as self-employed. You can be a newborn baby or an OAP, either way if you’re working as an actor on paid productions you must register to pay tax. The good news is that this part is very easy. Simply visit www.hmrc.gov.uk and complete a CWF1 form online.
Note down important details.
When you first register as self-employed you will receive a number of details from the HMRC. Make sure you file any letters and documents away and a keep a note of details such as Unique Tax Reference number (UTR) and the login details for the self assessment portal online. Trust us, if you register as self-employed in July you’ll have forgotten all the vital number and passwords by the time tax return deadline roles around.
Meticulous records and start now. You never know when you might land a role and need details to claim expenses for training or auditions. If you don’t have records of your income and expenditure a) it will be much harder when organising your tax return and b) you won’t be able to claim expenses. You should create spreadsheets for your income and expenditure (including mileage) and have folders to organise your invoices and receipts. Remember that you are required, by law, to keep all your records and receipts for seven years in case the HMRC wishes to do an investigation.
but be reasonable. Once registered as self-employed you are able to claim expenses against your taxable income for expenditure incurred in each tax year. (The tax year runs 6th April year X to 5th April year Y). What this means is that you can offset your expenses against earned taxable income. (Still with us?!)
E.g. If you earn £20,000 in the tax year and spent £2,800 on expenses you would owe tax on £20,000 – your personal allowance (the amount you can earn tax free each year, this varies each year but is currently around £11,500) – expenses.
So £20,000 – £11,500 personal allowance – £2,800 expenses = taxable income of £5,700.
So £20,000 – £11,000 personal allowance – £2,800 expenses = taxable income of £6,200.
By law HMRC states that expenses must be “wholly, exclusively and necessarily” incurred in the course of your work. Always ask yourself if you can answer that statement as a question. Expenses must always be reasonable; no claiming for £500/night hotels when a perfectly acceptable £50 option was available.
Due to the nature of our work, actors are able to claim for a wide range of expenses but if you are in doubt do check with a professional accountant. It’s important to be realistic but thorough about expenses. Allowable expenses include class fees (Yes your YAFTA acting classes are tax deductible!), travel to training and auditions, clothing for costume and auditions, subscription and membership fees (for Equity, Spotlight etc), food and drink when away for work and auditions, and a percentage of mobile phone and internet costs.
If you are working from home it is also possible to claim a small amount for a home office though the calculations for this are very complex so it’s best to calculate this with an accountant.
Finally, don’t forget that you can claim mileage at 45p per mile for travelling to auditions, classes and acting jobs. This rate is up to 10,000 miles per year after which it drops to 25p per mile. In order to do this you must retain records of every journey; postcodes to and from, date, total mileage, amount claiming for the journey and the car registration. You may have noticed that the mileage rate is significantly higher than the cost of petrol of diesel, this is because the rate is considered to take into account wear and tear of the vehicle and the related expenses. This means you cannot then make additional claims for maintenance and repair however charging mileage is better value than charging expenses for fuel and repairs.
Get an accountant.
While the self-assessment process is straight forward when earning at the lowest level, the safest option is always to get an accountant. Tax is a tricky area and particularly once you really begin earning, having an accountant means peace of mind about your tax affairs. Fees will vary and will often be related to how well you keep your records, another reason to make sure you’re meticulous!
Take control of your finances.
In the beginning it can be hard to afford to follow your dreams as well as paying the bills, therefore financial planning is important. Budget sensibly to enable you to start building your career and as soon as you begin earning, open a savings account.
Where at all possible it is prudent to save 20% of your earnings which will then cover the tax you will owe when filing your tax return along with any accountancy fees. Having a savings account will create a safety net so there are no nasty surprises come January and while it’s unlikely you will be paying tax to begin with, a savings habit from the outset will stand you in good stead once you begin earning regularly.
Remember the important dates! If you are doing a paper self assessment tax return the deadline is 31st October in the year continuing from tax year the return is for. E.g. For the 2018/2019 tax year this is 31st October 2019. If you are doing the self assessment online the deadline is 31st January in the year following the tax year the return is for. E.g. For the 2018/2019 tax year this is 31st January 2020.
Don’t forget that this is the date that tax is due to be paid too!
We hope these tips/rules have been useful and given you a basic understanding of what is required of you as an actor when it comes to self assessment and tax. Looking after your tax affairs is incredibly important as a self-employed actor and it is your legal responsibility to abide by the rules of the HMRC.
Do remember that YAFTA is not a financial advisor or accountancy firm. These tips are simply an initial guide to your responsibilities as a self-employed actor and an overview of this aspect of the industry and your career. Please do seek professional accounting and tax advice if you have further questions.
For the fun part, however; practising your acting in order to book those jobs and earn money, YAFTA’s got you covered! With the new academic year about to start why not try or get back to some professional screen acting training?
We have acting classes for all ages and abilities with locations across Yorkshire and Manchester. You can find out more and book a half price taster session at www.yafta.co.uk.
See you on screen!