There's only one way to get on top of your tax affairs and that's to identify and address your weaknesses
- or pay somebody to do it for you. 
This site is for those who think they can do better at tax - and aren't yet ready to pay somebody else to do their tax return. ​

Information and advice about tax for artists
​

Does tax frighten you? 

Are 'creating art' and 'completing a tax return' two activities which you regard as totally incompatible?

Take a look at this page if you're an artist who'd like to try do better in relation to:
  • what you need to declare
  • what you can claim
  • what returns you need to make, 
  • the tax you need to pay and 
  • what records you need to keep. 

It provides links to formal information and advice from:
  • HM Revenue & Customs in the UK and (links to formal advice generally designated HMRC)
  • the IRS in the USA.  (formal advice generally designated IRS)
  • the Australian government re. taxation 

Plus Tax TIPS from:
  • me - compiled from practical experience and questions I've asked over the years
  • various people who have written about tax tips for artists online

Plus Top Tax Blogs - with accessible good advice from authoritative expertis

Plus Videos by bona fide experts

This website is read by people all over the world so I'm sticking to the simpler principles which help artists to cope with their tax returns and maximising their allowable expenses
See also VAT for Artists

NOT on this site

This site does NOT provide:
  • Definitive answers on all matters relating to tax records for where you live. 
  • "Professional advice" available from somebody  with a tax qualification and current expertise of tax affairs anywhere in the world. 
I recommend that you pay a professional for tax advice IF:
  • your tax affairs are complicated 
  • you have a specific tax query which you can't find an answer to from official information available online.

Tax Tips - by artists - for artists
​

the taxman will class you as a business if it can prove you are doing “anything in the nature of trade”
The Telegraph - ​HMRC targets Etsy, eBay and Gumtree sellers – but when is your hobby taxable?
In summary, my top tax tips for artists are:
PRINCIPLES
  • Hobby income is still income and can still be taxable - know what you need to declare
  • Log your income and expenditure as you go
SPREADSHEET SKILLS
  • Learn how to use a spreadsheet
  • Use a summary worksheet page
ORGANISATION
  • Have an organised folder system for different tax years
  • File as you go
EXPENSES
  • Keep a note of business journeys
  • Record the exchange rate for international income and expenses
  • Always aim to make a profit if you want to claim expenses
ACCOUNTS
  • Use short-form accounts if you are not making lots of money
  • Learn the difference between income/expenditure and receipts/payments
  • Learn about tax allowances - and how to account for them​
BANKING
  • Keep a separate bank account for business receipts and payments
  • Set up a savings account for funds set aside to pay tax
  • Make sure you have funds available to pay the tax due on time
TRICKY ASPECTS
  • Foreign Income
TAX RETURN
  • Never ever EVADE paying tax - you can be subject to fines and/or a prison sentence
  • Tell tax people when you become self-employed
  • Register to use the online self-assessment system
  • Avoid financial penalties - pay tax on all relevant income, including all overseas income
  • Avoid financial penalties - get your submission in on time and pay your tax on time
  • Understand what a UTR is
  • Create a dedicated savings fund for your tax payments
I've often come across artists who tell me they're not good at bookkeeping or keeping track of their records of income and expenditure for tax purposes.

I vividly remember one evening spent trying to help a friend who was a master silversmith get his accounts together and being faced by his shoeboxes full of invoices and receipts.......
Art Business: Taxes and bookkeeping for artists
Picture
My article in 'The Artist' Magazine (September 2016)
This is a round-up of the websites, blog posts and articles about tax which have been written with artists in mind.

I've written two blog posts covering common tax issues and tips for how to address them plus one on when hobby artists need to complete tax returns.
REFERENCE: T​hese are:
New Tax Guide - for writers, artists, performers and other creative people 
(fifth edition)
By ​Peter Jason Riley CPA
​
If you are an American or live in the USA you may well find this book by Peter Jason Riley CPA to be helpful. It's specifically written to help with the tax affairs of creative people. Chapters include:
  • a chapter devoted to visual artists.
  • Crowdfunding for Creatives
  • Other Sates, Other Taxes, Other Countries and the Tax Home
Rated an average of 4.1 out of 5 stars by 7 customer review

BUY THIS BOOK

A hobby or a business?
​

Can you claim expenses?

Whether or not you can claim expenses as business expenses and hence as tax deductions depends on whether or not you are conducting your activities as a hobby or a business
In short - an activity qualifies as a business if it is carried on with the reasonable expectation of earning a profit.
The Australian Government is trialling a new tool to help Artists, Creatives and Makers who are making money to identify information for them about the differences between a hobby or business. By answering some simple questions, the tool can tell you:
  • whether your creative work looks like a hobby or a business
  • what government obligations you have.
Did you know?
​You can't claim a deduction for any losses from your creative work if it is a hobby.

It's a myth that there is a dollar threshold to be in a business. Some people can have very expensive hobbies! What matters is whether, as a whole, your activity is commercial with an aim to make a profit. Once you're in business, there are dollar thresholds that can affect your tax obligations.
​
A business or a hobby - Help me work it out | Australian government

Is your art a hobby of a business?
​

Business or hobby in the UK

In the UK, there is a concept called the "Badges of Trade.  This is how they came about and how they are defined.
A distinction is made between
  • a ‘trade’ this is normally a continuous operation with a degree of organisation or an infrastructure.
  • A ‘venture in the nature of a trade’ - which may lack those attributes but still display some characteristics of a trade.  HMRC considers 

Importantly hobby income is unlikely to defined as either if it has a history of losses (i.e. it is not operating in a commercial way). This means that any losses incurred may not be treated as business expenses and may not be used to offset tax liability.
In 1955 a report by the Royal Commission on the Taxation of Profits and Income reviewed case law and identified six badges of trade. This was the starting point and as you can imagine there has been some development in the area supplemented by case law. HM Revenue & Customs (HMRC) now lists nine badges of trade:

- profit seeking motive

- the number of transactions

​- the nature of the asset

- existence of similar trading transactions or interests

- changes to the asset

- the way the sale was carried out

- the source of finance

- interval of time between purchase and sale

- method of acquisition.
​
NEW! Hobby Income Tax Allowance (UK)
In the UK, as from 6th April 2017 (i.e. 2017/18 tax year). a new allowance has been introduced for those people generating hobby income.

The aim is to remove c.700k people from the need to complete a self-assessment return because they are making money from their hobby.

​In future so long as their hobby income does not exceed £1,000 they will no longer need to declare or pay tax on this income. Nor will they need to complete a self-assessment tax return (if the remainder of their income is taxed via PAYE)​
REFERENCE:
  • Tax-free allowances on property and trading income | GOV.UK - If your annual gross trading or property income is £1,000 or less and you’re not registered for Self Assessment, you won’t have to declare this income on a tax return. You must keep a record of this income.
Business or hobby in the USA

These are the questions the IRS in the USA asks to determine whether an activity is a business or a hobby.
Is Your Hobby a For-Profit Endeavor?

The IRS also provide a Checklist of questions (a "cheat sheet") - in "Is Your Hobby a For-Profit Endeavor?"
If you do not carry on your business or investment activity to make a profit, you cannot use a loss from the activity to offset other income.

Activities you do as a hobby, or mainly for sport or recreation, are often not entered into for profit.
​
Publication 535 (2014), Business Expenses
  • In determining whether you are carrying on an activity for profit, several factors are taken into account. No one factor alone is decisive. Among the factors to consider are whether:

    • - You carry on the activity in a businesslike manner,

    • - The time and effort you put into the activity indicate you intend to make it profitable,

    • - You depend on the income for your livelihood,

    • -Your losses are due to circumstances beyond your control (or are normal in the start-up phase of your type of business),

    • - You change your methods of operation in an attempt to improve profitability,

    • - You (or your advisors) have the knowledge needed to carry on the activity as a successful business,

    • - You were successful in making a profit in similar activities in the past,

    • - The activity makes a profit in some years, and

    • - You can expect to make a future profit from the appreciation of the assets used in the activity.
The following factors, although not all inclusive, may help you to determine whether your activity is an activity engaged in for profit or a hobby:

- Does the time and effort put into the activity indicate an intention to make a profit?

- Do you depend on income from the activity?

- If there are losses, are they due to circumstances beyond your control or did they occur in the start-up phase of the business?

- Have you changed methods of operation to improve profitability?

- Do you have the knowledge needed to carry on the activity as a successful business?

- Have you made a profit in similar activities in the past?

- Does the activity make a profit in some years?
​
  • - Do you expect to make a profit in the future from the appreciation of assets used in the activity?
Creativity is My Business
A Financial Organizer for Freelance Artists, Musicians, Photographers, Writers and Other Talented Individuals 
by Kiki Canniff

​The target audience for this book is the PART-TIME creative person - such as an artist - living in the USA who wants to understand the difference between being a hobby artist (which provides no tax benefits) and being a part-time professional self-employed artist.

​The book is essentially about how to avoid the hobby label and hence be able to calculate and deduct allowable expenses through setting up basic systems and recording all relevant data.

The author indicates she is somebody who has experience in helping creative people become more organised to IRS standards which can pass a tax audit.

(There's another Kiki Canniff book below. Buy one or the other but NOT both  Check out the contents page for both to see what I mean.)
Paperback: 102 pages
Publisher: One More Press
Date: September 10, 2012
BUY THIS BOOK

Official Guidance on Hobby Income
​

A hobby is a pastime or leisure activity conducted in your spare time for recreation or pleasure
You’re in business, if your activity, as a whole, is commercial with an aim to make a profit.
​
Business or Hobby | Australian Government

​Non- Official REFERENCE ARTICLES:

Second Incomes
​

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.
Comment on a previous incarnation of this site
HMRC has declared a campaign to crack down on those with a Second Income who fails to declare it for taxation purposes.

You have the opportunity to make a clean breast of it and get your tax affairs up to date in return for a reduced level of penalties for not coming clean earlier.
​​
To take part in the Second Incomes Campaign you should:

- tell HMRC that you want to take part in the Second Incomes Campaign (Notify)

- tell HMRC about all income, gains, tax and duties you’ve not previously told them about (Disclose)

- make a formal offer 

- pay what you owe

​- help HMRC as much as you can if they ask you for more information* To benefit from the reduced penalties offered HMRC will take account of the level to which you have helped them and the accuracy of the information you provided.
The Second Incomes Campaign is an opportunity for individuals to bring their tax affairs up to date if they have additional income that is not taxed through their main job or another Pay As You Earn (PAYE) scheme. 

REFERENCE:

Blogging about Tax

Art Business Info - News about art for Artists
​

Top Tax Blogs

These are tax blogs written by people professionally qualified to comment on tax - who provide accessible advice written for the small business person.
  • Barbara Weltman - Big Ideas for Small Business Blog - Called “the guru of small business taxes” by The Wall Street Journal,. She provides a complete source for tax, legal, and financial information specially developed for small businesses and independent entrepreneurs - written by a well-respected attorney and author. Named a Top 100 Small Business Influencer from 2011 to 2015.”  This is a link to past blog posts about Taxes

HM REVENUE & CUSTOMS - TAX FOR ARTISTS IN THE UK

Separate personal and business taxes
​

  • Use your personal tax account for non-business taxes like your pension, national insurance contributions, benefits or tax credits.
  • Use your business tax account if you are self employed or pay business taxes (like VAT or Corporation Tax) 

Register your business
​

This page tells you how to register as a sole trader with HMRC and pay tax and national insurance contributions on your profits after allowable expenses.

You need to register when your business becomes active. You'll get a reference number, an online account and it becomes much easier to register for other taxes such as VAT

You will then get a business tax account in addition to any personal tax account.
If you start working for yourself, you’re classed as a sole trader - even if you haven’t yet told HM Revenue and Customs (HMRC). 

​You must register and follow the rules for self-employed tax and National Insurance.
HM Revenue and Customs
HMRC actively search for non-registered businesses and undeclared business income. If caught you will have to pay interest and penalties in addition  to any outstanding tax.
Be business-like with expenses and tax | The Artist (September 2016)

Self Assessment for UK Artists
​

By law you are required to tell HMRC Revenue and Customs about any income that is not fully taxed, even if you are not sent a tax return.
HM Revenue and Customs
This section is relevant to all UK Residents ​
Her Majesty's Revenue & Customs - Self-Assessment 
​
In the UK, a hobby artist can find out if they have to complete a tax return by completing a very simple questionnaire called Check if you need to fill in a Self Assessment tax return which is available on the main government website.

It takes a while to find all the pages which are relevant to artists - so here's a shortcut!
Tax Tips for UK Artists

Keep an eye out for the regular HMRC webinars and videos which help you to understand more about how tax works and what you need to do and what records you need to keep.
Click Self Assessment Help and Deadlines to see the entire list of helpful HMRC Videos that are available
Guidance on Business Use of your Home
I recommend you check the date of the Information and whether or not it has been updated
BELOW - This HMRC video provides an accessible introduction to how expenses work if you are self-employed, what are allowable expenses, simplified (flat rate) expenses and what records you need to keep.
Budgeting for and Paying your self-assessment tax bill

Completing the self-assessment return is not the end. Now you have to pay your tax bill!

The two videos below provide help about:
  • how budget for your tax bill
  • how to pay your tax bill (I pay mine online using BACS).
These HMRC advice notes provide additional guidance about budgeting and paying self-assessment tax bills.

HMRC - making tax digital

The Government has announced in December 2015 its intention to change the way the tax system operates in the next five years to make it more efficient and effective for both the taxpayer and the government machine. Consultation is currently taking place on the proposed reforms.

The introduction of Digital Tax will
  • merge all forms of tax
  • make it real time rather than an annual event.
  • introduce a digital tax account which will replace the annual tax return form 
  • introduce quarterly reporting rather than an annual return
  • make the competition of a self-assessment return a method of checking tax rather than a means of making a tax return. 

In future all self-employed artists with a turnover of more than £10,000 p.a. will be keeping their records on a quarterly basis and making payments on a quarterly basis.

Employees and pensioners are excluded from the changes, unless they have secondary incomes of more than £10,000 per year
REFERENCE:​
I'll be researching and writing further on this matter. Subscribe to my News Blog if you want to keep in touch with what is happening - and get updates on other art business matters.
BELOW is an HMRC video about Making Tax Digital - for businesses

Inheritance Tax in the UK - Tax Incentives 

There are three schemes geared towards offering tax incentives in connection with cultural property.  

​Details of these are provided on the Art Council website.
  • Acceptance in Lieu - enables UK taxpayers to pay Inheritance Tax via the transfer of important works of art and other important heritage objects into public ownership.
  • Cultural Gifts Scheme - enables donations of important works of art and other heritage objects to be held for the benefit of the public or the nation (UK).
  • Private Treaty Sales - the purchase by a public museum or gallery in the UK & NI of an item that has been granted Conditional Exemption from Inheritance Tax - at a price that is beneficial to both public purchaser and private vendor.

IRISH TAX AND CUSTOMS - TAX FOR ARTISTS IN IRELAND
​

The Irish Tax and Customs

Artists in Ireland can be exempt from income tax in certain circumstances relating to the nature of the artwork and the type of payment received

Links to the relevant pages for artists living and working in Ireland
Visual Artists Ireland also produce an excellent set of guidelines for artists about business and tax in the form of  The Manual: A Survival Guide for Visual Artists. This includes sections on:
Section 195 Taxes Consolidation Act 1997 (TCA 1997) empowers the Revenue Commissioners to make a determination that certain artistic works are original and creative works generally recognised as having cultural or artistic merit.
​
For 2015 and subsequent years the first €50,000 per annum of profits or gains earned by writers, composers, visual artists and sculptors from the sale of their work is exempt from income tax in Ireland in certain circumstances. For the years 2011 to 2014 the maximum amount which was exempt was €40,000.
Claimants for Artists’ Exemption must be resident or ordinarily resident and domiciled, in an EU Member State or in an EEA State, and not resident elsewhere. 

THE IRS - TAX FOR ARTISTS IN THE USA
​

IRS - Key Web Pages

Here are links to the IRS pages most relevant to artists
  • Self-Employed Individuals Tax Center | IRS - This covers the definition of self-employed and the obligations of all those who are self-employed with respect to accounting records, tax returns and payment of tax
  • Deducting Business Expenses | IRS - Business expenses are the cost of carrying on a trade or business. These expenses are usually deductible if the business operates to make a profit.

Taxes & Bookkeeping for Artists - Steven Goldglit from New York Academy of Art on Vimeo.

Steven Goldglit - Managing Partner of Goldlit & Company speaks to students at the New York Academy of Art about taxes, bookkeeping and good habits on accounting for artists.
Annual Tax Mess Organiser for Writers, Artists, Self-publishers and Craftspeople
by Kiki Caniff
This is for people living in the USA who are involved in CREATIVE activities and who need do an IRS return.

​The important thing here is that the author is somebody who is experienced at helping self-employed businesses prepare for their tax return. She's got a basic model for how to do things which she then tailors specifically to groups of people who have a similar situation / tax issues.
Series: Annual Taxes
Paperback: 102 pages
Publisher: One More Press; 2 edition (January 6, 2016)

RECOMMENDED: Rated an average of 4.7 out of 5 stars on Amazon.com by 11 reviewers - there are some very complimentary reviews!

BUY THIS BOOK

More tips about tax 
​

I've categorised the links by the type of person offering the advice
By art business bods
By Lawyers
By Newspapers
By Tax Advisers (UK)
By Tax Advisers (USA)
By Performing Artists
  • Tax Tips for Independent Artists
    Music Business career development articles, marketing advice, articles on Booking and touring for musicians and performing artists, agents and managers

By Arts Commentators
Minding Your Business: A Guide to Money and Taxes for Creative Professionals
​by Martin Kamenski
This book focuses on communicating in plain English rather than "accountant speak" despite the fact the author is a fully qualified and practising certified accountant.

This is his fine-tuned explanation of how to deal with what's needed for your tax affairs if you are a creative person
Paperback: 128 pages
Publisher: Hal Leonard Books
Publication Date: December 1, 2012

RECOMMENDED: Rated an average of 4.4 out of 5 stars on Amazon.com by 5 reviewers - there are some very complimentary reviews!

BUY THIS BOOK

What aspect of tax puzzles you?

It's useful for me to know what questions you want answers to. Ask Away - using the contact form. 

Issues raised will ONLY  inform the future development of this section of the website and my blog posts. 

PLEASE NOTE:
  • Your question will not be published.
  • Your question will not be answered (see near the top of the page for the reasons why not).
Specifically I do NOT answer questions posed by individuals in relation to
  • the completion of forms
  • or what is the post appropriate way to report income
  • or anything about details relevant to their individual circumstances

    What's your tax question - in general terms?