By Abigail Butterworth, originally shared on her blog abbiecantdance.com
I wasn't ready for tax when I graduated. The girls that I live with and I have blagged our way through self-employment, tax returns, paying tax, but quite frankly, we didn't have a bloody clue. I sat through a terrible talk in my third year that involved a man scaring us all to death and making it appear that I needed an endless pot of money to pay all this tax I would suddenly owe. This is not the case. I'm not claiming to be a tax guru but I'm here to offer the basics with as little tax jargon and stress as possible. It's not going to be the most exciting post, but hopefully, it will help you get started.
First things first, you need to register as self-employed.
I advise doing this one as soon as poss because you never know when you're going to get a job but don't panic if you do have a job and haven't done it! It's not the end of the world, it just needs to be done before the 4th of October.
Firstly you need to log onto HMRC and you can through this link below! https://www.access.service.gov.uk/registration/email
Follow the questions through to register and you will receive a Government Gateway ID. Take note of this, you use it to log in to your accounts later on.
You then need to choose the option that states you are in business and active. This website constantly refers to you as a business, i.e I am Abigail Butterworth, a business. Very confusing initially but you kind of get used to it.
Read through and click next until you get four options! Choose Self Assessment (including Class 2 NI Contributions) and then choose Self-Employed.
It will ask for a date next! If you haven't worked yet outside of education, insert today's date and continue. If you have started a job, pop in your first day at work and proceed!
You will now have to fill out lots of personal info, make sure you have your National Insurance number to hand! If you don't have it, follow the link below:
https://www.gov.uk/lost-national-insurance-number
This next bit is pretty self-explanatory and the best bit of advice I got here was if you don't get it, it probably means the answer is no. Example: 'are you a share fisherman?' Probably not! Even for the question, 'are you working for one person or firm only?' the answer is no. Ignore the UTR question because you probs don't have one.
Continue on to talk about 'the business'. Here, enter the same date as before and pop in your stage name as the business. Make sure you state you are a performer in what sort of work do you do? Your business contact details are most likely your own address and telephone number so just pop in your details again.
When you get to the box below, do NOT click this. I'm guessing you will want to fill out your return and any other queries online.
Check through everything and accept the declaration!! You will now receive two letters, one is an activation code and one is of your Unique Tax Reference (the UTR they asked for earlier). Keep both of these safe as you will need them in the future but really, that is it! This bit really isn't too traumatic as long as you know your own name, address, and date of birth, but just get it over and done with because future you will thank you!
If you have made it this far, congrats!! On to your tax return!!
You will need to have been out a year, so you can't fill this in straight after registering as self-employed. Throughout your year, you need to collect up all your receipts of things you have spent your income on. You don't actually provide these in your return but they are needed for proof for up to five years. These are your 'expenses' and get taken away from your income so there is less money to tax.
The first thing I do it collate all of these in a spreadsheet, which my best pal Em provided me a year ago.
The columns are names with everything you can claim and the rows are every month April to April.
Using your receipts, you can easily fill in what you have spent each month and on what.
Things you can claim back are:
- Subscriptions - Spotlight, Equity, or anything that can be used as research such as Spotify, Netflix
- Hotel expenses or accommodation during a contract
- Food and drink not offered in a per diem
- Motor expenses and milage
- Clothing for auditions and shows
- Backing tracks and sheet music
- Electronics
- Marketing - Showreels, headshots
- Haircuts
- Gym memberships
- Classes
Below is a detailed breakdown of absolutely everything performers can claim back:
http://www.performanceaccountancy.co.uk/wp-content/uploads/2014/05/Expenses-for-performers-19-May-2014.pdf
You add up exactly how much you have spent altogether and then save the document as a PDF with only letters and numbers in the title, ready to upload at the very end of your tax return.
Next, sign in with the link below with your Government Gateway ID and password:
www.tax.service.gov.uk/gg/sign-in
Choose the 'complete and submit your 19/20 tax return option.'
Follow through the questions until you are on the 'tailor your return' page.
It starts with your employed work so you need your P45 or P60 for each PAYE job. Sometimes this is already done and shows up, sometimes it doesn't. All fun and games in the world of tax!!
After the multiple-choice questions that follow, then comes the harder part. Insert whether you have made over £85,000 (god, imagine!) and follow the questions about special circumstances. More often than not, the answer is no.
I don't actually know the best way to do this but now I add up everything I have made on my payslips to work out how much I've made in my self-employed work and insert that into my 'turnover.'
Next, choose to input your full expense total, that you calculated on that initial spreadsheet, as a 'single total breakdown.'
The next few boxes will just be left blank and you can move on until you come to the Class 4 NI questions. If you have made over £8424 after you take off your expenses, your answer is no. Next up is Class 2 NI, you are exempt if you make under £6365, but if not, you will owe something!
Ignore all the next questions as none of them really apply to you, and then I click yes to 'adding an attachment to my return.' Here is where I add the spreadsheet from early as proof.
After this, you get told exactly what you owe and what for, like National Insurance, and you get the option to save it. Always save it for proof!!
Click submit and you're free!! Easy as that.
I promise it isn't that traumatic, just a bit confusing at times. You don't need an accountant, just read through and take your time. The only time I've found it does get a little bit more difficult is when it comes to working abroad or at sea. You can apply for a tax reduction but you must have worked at sea for 365 days, meaning if this is your first contract, you probably won't qualify.
Here's a link to help you work out if you are eligible:
Here's the best link around which fully explains working at sea and tax:
https://www.sansdrama.com/cruise-ship-income.php
Hopefully, this post covers the basics for new grads! If you are still at a loss and confused, the best people for really good tax advice are:
@Sans_Drama
This musical theatre couple talk you through EVERYTHING, step by step with screenshots of the actual HMRC website, and even have a handy app in which you can input everything so it's all worked out in time for your return. It's especially good if you have multiple incomes, such as a few teaching jobs that you have to invoice for!
@theataccounts
These are accountants who make tax simple for performers. They're really present on twitter, always offering advice, and they pop sweets in your tax return if you choose to go with them!
My top tips for dealing with tax are:
- Read through what you can and can't claim, then be honest and have receipt proof in case of an investigation.
- Pop some money in an account just to be safe. I'm not saying loads but maybe 10% a month to make sure you're covered. This will mean you don't panic when it comes to paying if you do owe anything. I'll be honest, in my first year of graduation, I didn't owe anything extra.
- Once you have a PAYE job, keep hold of your P45 and check you are getting one every month so you are safe at the end.
- Don't be afraid to speak to your agent for a helping hand as they deal with all your money!
Abigail is a dancer and blogger than can be more commonly found under @abbiecantdance or in the corner of an overpriced coffee shop cradling a very sugary hot beverage.