Tax & Art – Art Tips
This is quite a hard subject, certainly taxing! Article Art Tips by Helen Rowlands (Artist) – UK based only and extracts has been taken from HMRC. Of course you should always take professional advice and this information does not constitute any advice whatsoever. If you require advice here is a useful link, I have put this article together, just for helpful advice for artists to consider.
When do I need to declare my income for art sales? Answer: Immediately. If you have not got an accountant to fill in all the paperwork for you then you have to do a self-Assessment which can be done on-line here.
Advantages of sending your tax return online
There are lots of advantages to sending your tax return online:
- it’s safe and secure – your account is encrypted, and protected by your chosen password and a unique User ID
- it’s convenient and can be used at any time
- you get an instant acknowledgment as soon as HMRC receives your tax return
- your tax is worked out automatically as you complete the form, so you know what you owe or are owed right away
- HMRC can process online tax returns faster than paper returns and repay any money you are owed more quickly
- the deadline for online returns is later than for paper returns
- you can complete part of your tax return, save it and do the rest later, working at your own pace to meet the deadline
- you can tailor your return, completing the right pages for your circumstances
- you can store your completed return online and print out a copy for your records
- at any time you can view a statement of what you have paid, and what you owe or are owed
- you can view or amend your contact details and use a secure email channel to ask HMRC a question
- you can pay by Direct Debit – this is safe and secure, and makes it less likely you’ll miss a payment deadline
Here is a helpful link for National Insurance contributions – rates and allowances: HM Revenue & Customs loss claims.
PAYE coding: HM Revenues have different codes so they can work out how much tax to take off the payments your commissions make to you from the start of the financial year which is usually the 6th April. It is important that the tax office has the correct code or you could be under paying or over paying. The law in the UK allows everyone who lives in the UK to receive some income before tax has to be paid – a “tax free amount” of income. That tax free amount starts from a “personal allowance” that depends on your circumstances. For example for people under 65 the standard allowance for this year – 2012 is £8,105.00 for this tax year.
So if your income for example is more than £8,105 you will pay tax as follows:
At 20% on the first £3,4370
At 40% on income between £34371 and £150000
At 50% on anything over £150,000
In practice your tax free amount is spread over the whole year, so you can receive about £675 a month, or £155 a week before the HMR&C will take tax off you.
Set up costs for example if you purchased some machinery or software which you needed to get the business up and running these costs go against your profit and loss (sales). If you have set your art work as a small business you would also have £1.00 share in the company allocated, don’t forget to actually pay it and put this into your accounting sheet.
Things to include in your balance sheet:
|Less Administrative costs this is not restrictive or exhaustive|
|Internet and broadband|
|Printing, postage and stationery|
|Repairs and renewals|
|Use of home as office|
Tips – You also can include:
Motor expenses – the normal rate claim back is 40p but you cannot claim back vat. See this table for further details on fuel benefit charges (Records you must keep).
You need to keep records of dates, mileage and details of all work journeys. Your employer needs this information to make expenses payments to you. You also need them to get any Mileage Allowance Relief.
Artist material (stationery or sundries)
Tangible fixed assets – office Equipment, web page & Depreciation of office equipment (i.e. how old is that laptop)
Don’t forget to include Debtors, Loans etc. & creditors, commissions are sales.
Share Capital – Share capital (UK English) or capital stock (US English) refers to the portion of a company’s equity that has been obtained (or will be obtained) by trading stock to a shareholder for cash or an equivalent item of capital value. For example, a company can issue shares in exchange for computer servers, instead of purchasing the servers with cash.
- VAT – this will need to applied after £80k turnover
- Free resources for tracking income
- Online tax calculators
After including all of the above you should be able to work out the Net book value of your business.
- Keep all receipts
- Keep all records up to date and if possible on excel in date order.
- Working from home? Costs can be added through a portion of your running costs.
- All Small business, needs submit paperwork on time or you could face penalties via the tax man.
Bad Debtors – what to do?
Also if your invoices are not being paid you may want consider invoice factoring. However on invoice factoring and how this could be costly and the amount of invoices you put your way, who actual bears the risk, to make sure the agreement that they don’t knock on your door, pay more and they will bear all the credit risk. Another way of doing it is early settlement discount if you do knock 2% off for early settlement. It was recommended going down a third party just getting control early settlement discount. To note cash is king, so difficult to turn the business away but we do need prompt payment, but the cash is not coming in. Click here to read more about invoice factoring.
If you have the monies a good account will do the following:
In today’s business world, the Chartered Accountant must be able to add value in a number of ways to their clients. Here are some of the accounting services that some accountants provide for small business:
- Preparation of statutory financial statements
- Provision of management information including regular management accounts
- Provision of a range of book-keeping services
- Preparation of corporation tax returns
- Personal and self-assessment returns
- Partnership returns
- VAT return preparation
- Business planning
- Start-up advice
- Business strategy review
- Preparation of forecast data and information
- Company secretarial
- Company formation
- Preparation and filing of statutory returns
- Independent IT advice
Category: Art Resources