Many artists fail to take advantage of tax-allowable expenses when filing their self-assessment tax returns. They often overlook costs like music subscription services, studio time and travel expenses.
Common Mistakes in Tax Filingsย
Missing Tax-Deductible Expenses
A survey revealed that the most commonly forgotten tax-deductible expenses include music subscriptions, studio time travel to performances, and equipment costs and maintenance. The survey revealed that around 30% of artists look for professional tax services for taxes, while around a quarter opt for things such as accountancy apps; the remaining try to manage this process by themselves.
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Poor Record Keeping and Documentation
Despite 90% of artists spending money on studio time, there are around 40% of them that do not categorise these expenses as business costs. Similarly, although 80% invest in instruments and equipment purchases or maintenance, around 30% of these artists do not document these expenditures.
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For more on maximizing tax deductions, see our guide on deductible ย startup costs that startups can claim?
Lack of Understanding
Our specialist team of Tax Accountants for Musicians noted over a period of time a trend in the lack of clarity among artists regarding what is eligible for deduction on their tax returns. Our team highlighted a gap in financial knowledge and an increase in financial instability among artists who were not proactively trying to manage their taxes. This instability hinders them from outsourcing this administrative burden to specialists, which gets them stuck in a vicious cycle of constant tax struggles. It was also noted that in most cases where the individuals did not manage their finances effectively, more than half of them had no savings, with almost 48% reportedly dealing with debt.ย
Any expenses related to a musician carrying out a business activity should be carefully reviewed for tax benefits. It is important that you discuss these matters with your accountant thoroughly and also let a specialist personal tax accountant examine your tax return calculations once in a while if you’re handling your taxes independently.
Financial Stability and Its Impact on Musicians
When people envision their music career flourishing, accounting and taxes are not typically part of that dream. However, managing finances is an aspect of monetising your talents, especially in the early stages, so as to be able to invest those earnings in your career and business growth.
Considering the impact on artists’ health, a survey revealed that 4% never worry about money, while 26% worry daily. Financial worries mainly centre around housing costs, mostly including but not limited to rent, mortgage, bills and food expenses. The inability to afford activities is also a significant concern.
We also noted that most musicians have goals to clear their debts, while others want to save money, buy a house or desire more time for music-related endeavours.ย
- There are a variety of creative industry tax reliefs available to artists, you can learn more about these creative tax reliefs in our in-depth guide.
We have compiled a handbook for musicians on tax deductible expenses to help them minimise their tax while improving business performance. This in-depth handbook offers a detailed list of the various expenses musicians should make sure they are claiming to minimise their taxes. We can also provide an initial free consultation to help you understand how we can assist with your tax obligations and save you time and money.
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