Expenses: How to record and what to claim
> Why are they so important?
Being self-employed we're a 'business' and businesses don't get taxed on their income, they get taxed on their profit (your income MINUS any 'allowable business expenses'). Aha!
For example.... Lets say you have £20,000 of total income, but have £4,000 of expenses, instead of being due to pay tax on £20,000, you only pay tax on £16,000!! Want to know more? Thought so...
>> What is an expense?
Essentially, it's anything you spend money on throughout the tax year that directly relates to the running of your 'business' ie. self-employed performer life. You'll find a big list of typical performer expenses a little further down!
>>> How do I record them?
Any expense that you'd like to deduct from your income needs to be recorded one way or the other - and there's no getting around this! Obviously we think the SansDrama Online App has you covered - a couple of clicks here, upload a photo of your reciept there and you're done and dusted, secure in the knowledge that it's all safe and sound. Easy peasy! But if you're braving it alone, you need to record the date, vendor, value and description of the expense, plus the location of where you're keeping the evidence (ie. receipt).
>>>> What do I need to keep hold of?
When it comes to completing your annual tax return, you DO NOT need to provide any evidence/receipts for the 'allowable business expenses' you're claiming. However... HMRC can investigate the expense claims of any tax return you do and eventhough it's pretty unlikely to happen, you need to have your evidence ready just in case! They should let you know within a year of the 31st January completion deadline if they are planning on investigating your accounts. You're meant to keep your evidence for at least 5 years after the 31st January submission deadline for each tax return you do. Simple solution? I just take a photo of the expense receipt whilst I'm out and about and upload it to the SansDrama Online App; where it's all stored for me, so for those of you using the SD app, no need to keep hard copies of receipts etc but if not then have your evidence stashed away as best you can, even if you shove reciepts into the bottom of your ruck-sack for months on end. An ideal piece of evidece would be a VAT receipt either in paper or electronic form.
But what about cash payments?
Dance classes, for example, you usually pay for in cash - not ideal! Technically, you should get a receipt book and get Pineapple to sign it every time you go, but that's not really practical is it!? Luckily for us, HMRC don't tend to get too upset over low value cash payments. Phew! However, if they were to investigate your tax return, the key thing is to be able to demonstrate that you have a good, logical recording system (i.e. you didn't just come up with a number at random when you filled in your tax return). SD app users, no worries just record it as any other expense (minus the receipt obviously) and you're done. Better still, we'll soon be adding a specific function for tracking classes (a class tracker, if you like)! Not an SD app user? No problemo, any clear method that demonstrates a good recording system is fine - maybe you are really good with spreadsheets? No? Me neither...
>>>> What can I claim?
In a nutshell...whenever you are spending money on something that is genuinely part of running your business, then chances are that it will be deductible from your income. Ooo yes we like that!
The HMRC page explaining this is actually pretty good (https://www.gov.uk/expenses-if-youre-self-employed), but we're all about the performers here, so let's get specific!
- If you are part of a trade union (e.g. Equity) or casting sites (e.g. Spotlight, Casting Call Pro, Star Now) subscription fees are completely deductable expenses. Equally, any subscriptions such as Spotify Music would be deductable providing you were using it for class/gym workouts/show playlists for research.
- Computers or Laptops
- Needs to be used for business purposes, like keeping on top of your finances (with SansDrama Online App of course! *wink wink*) looking for auditions, researching shows/roles etc. PLUS - any additional software like Microsoft Office to write and edit your CVs or any anti-virus software, maybe? Backup hardware and printers (for that last minute CV print - we've all been there trust me!) are all deductable expenses, too!
- Telephone Bills
- If you're anything like me, then you'll never be off the blooming thing! If you are using your phone to generally run your career (such as calling your agent, booking auditions etc), then your line rental and call costs are absolutely deductible - winner! But, if you use your phone to make personal calls, then a percentage of those costs won’t be allowable. The easiest way to work this out is to think honestly about what percentage of time is actually used for running your business. Then offset that percentage as an expense. A third perhaps? So 33% of your telephone bill per month as a deductable expense?
- Working From Home
- At-home-admin is a given being self-employed. We use our home as an office to do tasks such as show research or audition prep (much to the displeasure of my neighbours when I need to belt at 8am - sorry, not sorry!). The easiest way to do this is to use HMRC’s standard flat rates:
Hours of business use per month Flat rate per month Less than 25 £0 25 to 50 £10 51 to 100 £18 101 and more £26
- Stationary or postage
- Don't forget you can also offset any stationary or postage relating to the running of your business too.
- Agent Commission
- Yes! Agent commission plus any VAT your agent takes is an allowable expense. Don't forget that you need to record it in your income too (e.g. You book a job that is worth £1000 and your agent takes £125 (12.5%) commission, leaving you with £875. To record this your 'income' would be £1000 and your 'expenses' would be £125.)
- Financial costs
- Hiring a solicitor for contract advice, paying an accountant to manage your finances, or even better using the SansDrama Online App to do it all for you, are all tax deductible expenses.
- Bank charges
- If you need a loan to be able to buy a laptop, for example, then a percentage of the interest costs will be allowable expenses. And it works the same way if a career development loan is taken out to fund certain training costs.
- Travel costs
- Every time you travel to go to a class, an audition, a networking event or to see a show (to name a few) you are incurring travel expenses for the running of your business. This is all allowable! So...Oyster card receipts, other weekly/monthly travel cards, taxi and Uber fares, train/bus/tube tickets and even flights (if you had an audition in Germany for instance) are all deductable!
- If you fancy trying to work out a percentage of the actual costs of buying and running your vehicle, eg insurance, repairs, servicing, fuel, then knock yourself out! However, I think the easiest method is using HMRC's simplified expenses - using a flat rate for mileage instead. You should know that once you use the flat rates for a vehicle, you must continue to do so as long as you use that particular vehicle for your business.
Vehicle Flat rate per mile with simplified expenses:
Vehicle use Flat rate per mile Cars and goods vehicles first 10,000 miles 45p Cars and goods vehicles after 10,000 miles 25p Motorcycles 24p
10,000 miles x 45p = £4,500
1,000 miles x 25p = £250
Total you can claim = £4,750
- Hotel stays
- That's right, if you're on a genuine business trip (say an audition in Germany), then hotel costs and even meals whilst you're on the trip are deductable expenses.
- Clothing expenses
- Now as much as i'd love to expense every outfit I buy for a Friday night, the key with this one is that anything not used soley for business purposes, is not deductable *inner sob*. However, dancewear/shoes, gymwear for training, trainers and that 'go to' audition outfit are all examples of deductable expenses.
- Advertising or marketing
- Self-promotion is key! So what can we expense?? Promotional websites (including annual domain registrations), dance reels, singing reels, showreels (all the reeeeels!) subscriptions to casting websites, stage make-up and haircuts/colours, beauty treatments like waxing/threading all count too (let's call this 'image maintenance'). Any headshots or portfolio images including hard copy prints of them all count as tax deductable. Even the entrance fees to networking events.
- Theatre tickets, ballet, opera and any other stage performance is tax deductible (in addition to your travelling costs). Ooo and that includes any booking fees too!
- Treatments such as physiotherapy or vocal massages are tax allowable. Any singing lessons/dance classes/acting lessons/casting or audition workshops are all deductable too.
>>>>> And how do I claim them?
When it comes to completing your self-assessment tax return each year, you just pop the number of your accumulated expenses in the box when prompted and HMRC calculates a lower taxable income for you. Simple!
This will not be a 'moment of truth' if you're using the SansDrama Online App as it offsets any expenses from your income live so you can see exactly what tax you currently owe/are due back whenever you fancy. Winning!
As always, we've tried to streamline this just the right amount, but if we've missed something, you have a specific question or you're just confused then just get in touch! We don't bite (usually) and always love to hear from you!
Love Jo and James x