Monday, August 15, 2011

Basic Income Tax and the Artist - Part I -Deadlines

Having been involved with both Income and Corporation Tax for almost all of my working life I thought it might be useful to share some things you need to consider once you begin earning money from your art.

As I am only familiar with the UK tax system this post will be less useful to my international readers with regard to dates etc, but information regarding record keeping applies to all.
I do plan on going into more depth in future posts.

If you're self-employed then you are responsible for keeping records of your income and expenses and paying your tax and NIC (National Insurance Contributions) You might use the services of a Financial Advisor/Accountant but even then the ultimate responsibility rests with you as the individual to ensure that you provide them with complete business records.

1. Important Deadlines
Once you start making money from your art you need to advise HMRC (Her Majesty's Revenue and Customs) within three months of the start date.
(However if you are only receiving small occasional amounts of money it could be classed as a hobby, in that case you would not need to inform HMRC)
If the intent is there to make a profit or you feel your hobby has turned into a business make sure to get in touch with HMRC.

Once you are registered as self-employed you will receive a tax return each year to complete and submit to HMRC, the deadlines for submitting the return are:-
Midnight on 31/10 each year for paper returns
Midnight on 31/01 each year if submitting on-line (or 3 months from the date of the letter advising you to complete a return if you received it after the 31/10)
31/10 if you want HMRC to calculate the amount of tax you owe

The other important deadlines are the dates for paying your income tax:-
All tax must be paid by the 31/01 following the end of the tax year, for example any tax due for the tax year 2010/11 (ends on 05/04/2011) must be paid by 31/01/2012
Any payment on account that HMRC tells you to pay is due on 31/07 (only applies if your liability to income tax is over £1000)


Year Ended 05/04 2011
Liability £1200
31/01/2012 Due £1200 plus £600 (half of the £1200) on account for 2011/12 = £1800
31/07/2012 2nd payment on account £600 (the other half of the £1200)

HMRC estimate the following year to be the same as the current year until they review your tax return or you tell them otherwise.

If anyone wants me to carry this on with what happens in January 2013 if the liability has increased just ask, otherwise I'll leave it relatively straight forward.

The HMRC website is useful if you want any additional information

My next post will be on record keeping, what you need to keep to ensure you pay the right amount of tax.


sue said...

Great post Gayle - interesting and easy to follow and very useful for people setting our on their own who aren't sure how to deal with reporting to HMRC.

Of course, they could always do what I do and just sleep with my accountant (but then we are married) :o.

Katherine Tyrrell said...

A really useful blog post Gayle - I'll be including it on Making A Mark in "who's made a mark this week?"

Gayle Mason said...

Me too Sue, it makes life easier now we're both on the same side of the fence:)
Thanks Katherine, I'm moving on to record keeping later this week