Getting Your Taxes Done
Written by Natalia Knowlton
Disclaimer: As you may have noticed, I am not an accountant. This is simply a post outlining what I’ve learned from doing my taxes as a self-employed artist. Please consult an accounting professional or HMRC for official advice.
During these uncertain times, we all crave some sense of control. For some that’s baking, for me that’s my finances and playing The Sims. Doing your tax return may seem daunting, but it can also give you clarity and a better understanding of your finances for the year ahead. Especially if you’re struggling financially at the moment, this is a crucial step to take.
I filed my first tax return last year (for the 18/19 tax year) and have learned a lot along the way. Whether it’s your first tax return or just need a refresher on the steps, hopefully you’re inspired to spend an afternoon tackling your taxes. It’s not glamorous, but it’s something you can do to take control of your life right now.
Track your income
Create an excel document with all of your freelance and PAYE income (if applicable) for the 19/20 tax year. The ideal situation is to do this gradually throughout the year but if this is your first time, don’t worry! It can be tedious to go through your banking statements, payslips and invoices the first time but hopefully going forward you’ll get a better sense of what you need to do to make things easier for yourself.
If you have PAYE income, definitely compare your P60’s to your income tracker to make sure everything is correct.
Track your expenses
Ah, expenses. I remember finding the prospect of tracking my receipts so daunting that I almost didn’t do it for my first tax return. As you might've already guessed, the first time is always the worst because you have to look through banking statements (again!) and gather the receipts in one place (I recommend creating a receipt tracker on excel and then a folder with the screenshots/scans of your receipts). There will also be moments where you’ll hate yourself for not saving more receipts, but give yourself a break. It will get easier going forward.
For starters, here are the things you can expense:
House bills: If you work from home, you can expense part of your rent, council tax and utility bills. Because of quarantine, we’re doing a lot more work from home and our utility bills will go up (but the good news is that we can expense it!). Click here to figure out how to expense house bills.
Research and training: If you’re an artist you’ll need to work on your craft and hone your skills throughout your career. This means that you can expense workshops, play texts, books and theatre tickets (as long as you save those receipts! Email confirmations also work. Worst case scenario you can also screen shot bank statements, especially if you label them “expenses” on apps like Monzo).
Marketing: This includes website and spotlight subscriptions, business cards, hiring a graphic designer or a website builder. If you self-produce under your name, any marketing costs for your shows are also expendable.
General note about self-producing: if you don’t have a separate business for your self-producing work, you can expense pretty much anything in your production budget.
Office supplies and subscriptions: Microsoft office subscription, Qlab, any editing or scriptwriting software, stationary, laptop or phone. You get the picture, if you use them for your business, you can expense it. Things like laptops and phones are also used for personal things, so you might have to expense a percentage of the total cost (use the same formula you used to break down your house bills).
Figure out how much you owe
Your tax bill will be 20% of your taxable income after you've hit the tax-free threshold (which is £12,500 for the 19/20 tax year).
Example: If your total income is £20,000 and your expenses are £3,000 then your taxable income is £17,000. After £12,500 you only pay 20% of £4,500 (that's £900).
If you have PAYE income, look through payslips to see if any money has already been deducted for taxes and National Insurance. Don’t worry if you can’t figure out how much you owe in general because the system does work it out for you. This is all for you to understand and get a better sense of how taxes work.
Do your tax return
There’s not much to say here: start your tax return online and input all your data into the system. Some questions are confusing but I find that if I type them into google, there is a lot of advice out there. You can also call HMRC! They’re probably very busy at the moment but it’s always worth calling them if something is unclear, that is what they’re there for.
Reset for the new tax year
As I said before, the first tax return is always the most painful (take a shot if you've made a drinking game out of this). Once you’ve done it, have a think of how you want to do things going forward. Create a new income and expense tracker for you to fill out gradually. I’ve gotten into the habit of saving any email confirmation, bill or receipt that I know I can expense, then I go over those once a week to input them in my expense tracker. During pre-quarantine life, if I was out and bought a playtext for example, I’d immediately make a note on my notes app as a reminder to input that info in my tracker when I got home.
Don't forget to learn from your mistakes. Did you set aside too much money or too little money for taxes? Did you expense your house bills incorrectly? Were your tax codes wrong on any PAYE income? Get that all sorted at the start of the new tax year.
That’s it folks. Boil the kettle, make yourself a cup of tea and start colour-coding those excel docs (that thought always gets me excited).