Category: Art Business Practices

Does your art create a second income?

28/1/2019

Do you make a second income from your art?

As well as knowing what you can claim against tax, it's important to know what you need to declare.

Even if your art sales are a second income, by trying to sell only for cash and to not declare anything, it can backfire on you in the long run.
a comment on a previous site I ran

Do you know that Her Majesty's Revenue & Customs (HMRC) in the UK are trying to recover more tax from those with second incomes?

Other tax authorities in other countries are also trying to do the same thing.

In particular, they're very interested in "the black economy" - i.e. those that don't declare that income for tax purposes (a.k.a. tax evasion)

business activity and income that people do not record in order to avoid paying tax on it

business activity that is illegal because tax on profits is not paid to the government

Definitions of the 'black economy' | Cambridge Dictionary

There are lots of websites highlighting how you can use your talents and skills to make a second income.

However very few tell you about the tax implications of a second income.

Bottom line - if you get found out, the result can be very significant punitive fines and possibly a criminal record..

On the other hand, some tax authorities realise that the right tax might not get paid at the right time by the people who need to - because not everybody understands the system. They want to make it possible for people with unpaid tax to remedy mistakes before the taxman contacts you.

AN EXAMPLE OF CONFUSION

Some people believe that it's possible to earn a certain amount of additional income before you need to declare it for tax purposes.
BUT:

They assume that their annual personal tax allowance is equivalent to permission NOT to declare earned income up to that sum (e.g. see Tax charges on a second income)
They do not know that an individual's personal allowance is built in to the tax code/rate used by your employer to tax your main source of income - and is not available to offset second incomes.
They are unaware that all second income attracts the highest rate of tax used for your total income.

A second income from your art

Lots of non-professional artists make a second income from their art from their art. Not so many remember to check out what that means for how they need to pay tax on that income.

This post provides a summary of

some of the things you need to know about taxation on second incomes (but it is NOT professional/legal advice and I owe you no liability in respect of what is set out below.)
what you must do to declare any unreported tax liabilities (in the UK)

make sure you declare everything you should add - and do your sums correctly

What is a second income?

The type of activities that tend to generate a second income - in general - as described by HMRC are set out below.

I've also included some hypothetical EXAMPLES of what such activities might be identified and categorised for artists

fees from consultancy or other 'expert' services such as public speaking or providing training - EXAMPLE: lectures to art schools, art classes at home (or elsewhere; individual personal tuition delivered to various students)
payment for organising parties and events or providing entertainment (EXAMPLE: organising painting parties / painting holidays for people who are not close friends)
income from activities such as taxi driving, hairdressing, providing fitness training or landscape gardening (EXAMPLE: painting commissions to order)
profits from spare time activities such as making and selling craft items (EXAMPLE: selling artwork online.)
profits from buying and selling goods, for example regular market stalls, boot sales etc (EXAMPLE: selling art or crafts on a regular basis at various local / regional art fair or market)

To get clarification of how HMRC will treat you, it's a good idea to reference two other posts

Income Tax: The nine badges of trade (January 2017) - what specific tests HMRC use to differentiate between artists who are trading and hobby artists who make a little bit of hobby income
The bonus if you're selling art - but not a lot! (April 2018) - about the hobby income allowance - which allows hobby artists to can earn small sums and not pay tax (so long as they keep proper records). The tax free allowance is also available to those earning more than £1,000 - so long as they don't reduce their tax bill by claiming expenses and offsetting these against their turnover.

If your annual gross trading or property income, from one or more trades or businesses is more than £1,000 you can use the tax-free allowances, instead of deducting any expenses or other allowances.

HMRC and second incomes

It does not matter why your tax affairs are wrong, it’s better to come to HMRC and admit any failures or inaccuracies rather than wait until we contact you
How to make a voluntary disclosure to the HMRC (updated January 19th 2019)

In 2014, the HMRC ran a campaign relating to second incomes which took the approach that most people want to pay the right tax - but sometimes they just find the whole process rather confusing. It offered people the opportunity to disclose their situation in relation to any unpaid tax. The campaign finished in 2017.

Now that campaign has come to an end, the approach continues to be supportive rather than punitive in the first instance - but ONLY for those who make a formal disclosure.

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Legal Matters for Artists - ignorance is no defence

21/1/2019

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"Ignorance is no defence" is a very basic legal principle and an age old 'law'.

It basically means that you cannot use your ignorance of the law as an excuse for why you ignored it or flouted it. It also prevents people from avoiding prosecution for things they have done wrong.

As an artist you can neither ignore the law nor try to excuse things you have done by saying you didn't know.

If you go into business, it's a basic principle that you must find out all the things you "need to know" to conduct your business affairs properly,

Legal matters for artists

Legal and business considerations exists from the moment an artist conceives a work
Tad Crawford

I'm no lawyer - and therefore not an expert. However I do know enough to be periodically horrified when I realise the ignorance of some artists about the law that relates to their various activities.

Ignorance may be bliss - but it is very definitely no defence and some artists leave themselves open to various liabilities as a result!

I've created a NEW page, called Legal Matters for Artists, which provides a brief summary of matters which can have legal consequences for artists and what you "need to know" about. You can find it

in the Office Practices section
of the PRACTICE Section
of my website Art Business Info for Artists

In essence it's a combination of a checklist of legal issues relevant to artists PLUS a compendium of other legal resources

It's also relevant to those arts and artists' organisations which conduct activities covered by law relating to art business.

Headline matters

Various laws are relevant to artists - but do you know what these are?

The "headlines" of legal matters cover the following. Under each heading I highlight and suggest the type of issues you may well "need to know" about or be aware of.

Artists Rights
Art Sales - Auctions, Galleries and Dealers
Artist Contracts with Galleries and Dealers
Online Sales: art / commissions / tuition
Art Sales / Tuition: At Home / Open Studios
Art Insurance and Safeguarding
Moving and Shipping Art - including over international borders
Money and Art - and Tax
Art Estates and Legacies
Personal data collection and data protection

Each of these provides links to other pages on my website which provide some of the answers - or links to places which can.

Pages are in development for the following sections - although legal issues which need to be considered are highlighted on the Legal Matters page.

Art Competitions and Open Exhibitions
Patrons and Commissions
Artist as Author / Publisher
Artist as employer / employee.

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Learning more about art

It also contains links to:

various sources of expertise and commentary on art law
various articles and online sites providing information about art law
a book about art law
lawyers specialising in art - including pro bono and fixed price lawyers
courses providing professional development for museum and gallery professionals
tuition in law relevant to art - including a Distance Learning Diploma in Art Law

If anybody can think of anything I've omitted please leave a comment below or contact me

DISCLAIMER: I am NOT a lawyer. Nor do I provide professional advice on legal matters. If you need legal advice you need to consult a professionally qualified lawyer. Given the size and scope of this site I also do NOT warrant that:

any information is complete and/or professional
all links lead to the most current and up to date information.

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Paul Klein on How to Succeed as an Artist

21/10/2018

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This video is well worth watching by those trying to succeed as artists.

Paul Klein has been involved in the art world and with artists for over 40 years. He used to run a gallery. He now focuses on teaching an online professional course for artists - and he works as mentor to TED Fellows.

Making good art is a necessary but not sufficient condition for becoming a successful artist.

He considers there are three necessary preconditions for being a successful artist

Be Distinctive - do not resemble other people. Be yourself and find what makes your work distinctive
Become Engaged - it's not all about the art, you have to get out of your studio Associate with those who are better than yourself. Make opportunities for your art to get seen and for more eyeballs to see your work.
Make Good Art - everything is subjective. People respond in an emotional visceral way to your art.

He identifies a mantra I have heard from a number of people - and frequently repeat to artists I've met in the last decade or so.

50% of an artist's efforts should be outside of making art - that means 30-70 of an artist's time should be on making an artist's career.

Sometimes artists can benefit enormously by having

a business partner,
a long term business strategy - and
by applying creativity to their career.

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What happens when your "tech guy" disappears?

24/8/2018

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What happens if your "tech guy"

stops communicating?
disappears?
unplugs for the last time - and dies suddenly?

I've been amazed over the years by the extent to which artists put their trust for the tech side of their whole online life - their website, their way of communicating online and for some major income streams from their art business - to one person - your "tech guy"

The sad truth

I was reminded of this when reading a post by Gail Sibley about 5 Lessons Learnt From The Loss Of My Tech Guy.

RECOMMENDED READING: I commend the post to those who are very dependent on A. N. Other for their online art business for an account of what can happen when it really happens - and your "tech guy" dies.

How to avoid being left in limbo

I've long been an advocate of the fact that people need to learn how to do as much as they can for themselves - just because it makes your business more robust (and less risky to tech guy disappearing) and because it costs a lot less money!

However I also recognise that as your art business builds you will need help - and that means employing experts to help you do things you need to do with your art business - including the tech side of being online. Whether it's building, maintaining and developing your website, making a video for your online classes or building a subscription based forum for your teaching online.

The thing is you ALWAYS need to remain in control if you want to be secure your art business and your art income.

That means:

YOU cannot allow another person to have total control over your website - you must manage the risks of them "falling under a bus"
YOU must ALWAYS own your own domain name - in your name - not the name of your tech guy. Otherwise the credibility that you build for that domain name is owned by him not you.
YOU must ALWAYS have access to your own website - as well as your tech guy. That means knowing ALL the relevant passwords. That means thinking very hard before building functionality for systems that he had a licence for but you don't
YOU must have access at all times to your email subscription database - otherwise you might have to build it all over again from scratch - but without being able to email them to tell them. Plus you MUST have a written agreement with your "tech guy" about the security of that data.
YOU run a major risk if your system is a one-off built by the tech. guy and not understood by anybody else. That could mean starting again from scratch if he disappears!

So if you need help to run the tech side of your art business life online think about the "what ifs"

what if he's not around any more - what do you not have access to, what parts of your online life are in jeopardy?
what if you argue and/or he holds you to ransom re. the increase in his fee. This has happened to people I know more times than I thought possible!
what if you want to move your website to another tech guy - do you have an agreement in places for how this happens - sensibly and efficiently?

Identify the risks - and manage them

IDENTIFY:

The specific RISKS of every aspect of the tech. side of your art business
The nature of the IMPACT on your art business life (time/effort) and income ($/£000) if your tech guy disappeared/was no longer available and/or no longer working for you
identify how to REDUCE YOUR RISKS and what action you need to take to reduce each specific risk eg agreements as to your access to the systems which support your business

Then TAKE ACTION to make your art business life more secure for the future.

Remember even the best of chums can fall out - or your "tech guy" can suddenly die. So even if your tech guy is the best tech guy ever, you MUST have a fail-safe plan that works in your back pocket.

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NEW: The Best Art Business Books for Artists

4/4/2018

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The Best Art Business Books for Artists is the new home for information from another site I developed with the same name. It's a work in progress at present but now has enough content to make it worth highlighting and my other site is about to be closed down.

Initial categories cover:

Short Art Business Guides - for a quick read
Starting Out - for those who aspire to an art career
How to have a career and make money as an artist
How to sell your art
Understanding Art Galleries
Copyright
Art in Transit
The Artists' Resale Right
Art Legacy Planning

Interestingly most of the books on the new page are EITHER new OR new editions of books that have been around for a while.

So much has changed in the past few years. In particular the emphasis on business online is now much more important.

I'm finding that I really need to look long and hard at content as I do the transfer - and I'm needing to buy new editions of books I've loved in the past.

Plus I know than a few authors have recognised the need to update and have new editions in the pipeline.

For example, a couple of days ago I was contacted by Caroll Michels - author of How to Survive and Prosper as an Artist (a book I really rate!) - about the NEW edition of her book which is published later this month. This has got a LOT of new content to reflect the changes in the workings of the art market and the new challenges for all artists - even established ones. For example:

the use of social media and website development as marketing and publicity tools – what works and what doesn’t work;
the confusions between the “art-buying public” and the “consumer market”;
neighbourhood gentrification and the growing challenges of securing a reasonably priced work/live space; and
the pros and cons of the new business models for artist career development.

So I hope you'll join me in my investigation of what's currently on offer and the best books about the art business for artists which offer both great content and good value for money!

There's a lot more to come and this page will be continuously updated over the next few months - and years!

Subscribe to Art Business Info. for Artists - NEWS by Email
and receive every post via email.
Your subscription is only activated after you verify the link in the email you will receive

Tell me about YOUR favourite art business books!

I'm also interested to hear about what new art business books you've been buying and getting value from.

If you'd like to share your recommendations with fellow artists just leave a comment on this blog post - or contact me and give me a recommendation.

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Art Business Info: NEWS

Does your art create a second income?

A second income from your art

What is a second income?

HMRC and second incomes

Legal Matters for Artists - ignorance is no defence

Legal matters for artists

Headline matters

Learning more about art

Paul Klein on How to Succeed as an Artist

What happens when your "tech guy" disappears?

The sad truth

How to avoid being left in limbo

Identify the risks - and manage them

NEW: The Best Art Business Books for Artists

Tell me about YOUR favourite art business books!

Art Business Info. News for Artists

Visitors so far

Author

Archives

Categories

Art Business Info: NEWS

Does your art create a second income?

A second income from your art​

What is a second income?​

​HMRC and second incomes​

Legal Matters for Artists - ignorance is no defence

Legal matters for artists​

Headline matters

Learning more about art

Paul Klein on How to Succeed as an Artist

What happens when your "tech guy" disappears?

The sad truth​

How to avoid being left in limbo​

Identify the risks - and manage them​

NEW: The Best Art Business Books for Artists

Tell me about YOUR favourite art business books!

Art Business Info. News for Artists

Visitors so far

Author

Archives

Categories

A second income from your art

What is a second income?

HMRC and second incomes

Legal matters for artists

The sad truth

How to avoid being left in limbo

Identify the risks - and manage them