Self Employment & Taxes
This is the first in a series of resources I will be publishing on my blog for young/emerging theatre practitioners. These posts will cover a wide range of topics, but they are all things I wish someone had told me when I was entering the industry. The information is published here as a free resource for anyone and everyone. As with everything, please be sure to do your own research.
I recommend that all theatre practitioners register self-employed with HMRC. This is also called registering for self-assessment. It is a simple process and more information can be found here. The vast majority of jobs for theatre practitioners will require you to be self-employed and you will be hired as a freelancer.
Be sure to get a contract for freelance jobs, just as you would as an employee. Just because you are a freelancer does not mean that you should accept jobs without something in writing. It protects you and your collaborators. It also clearly states how much you get paid and when. Here is an example contract that my theatre company uses with freelance actors and artists. Feel free to download it and adapt it to have your own basic contract on file.
Be sure to put a "Due By" date on your invoices, providing the person that hired you with the latest date that you expect to be paid. This is also a good thing to discuss with them. For things like the Edinburgh Fringe, the festival doesn't pay out until months after the final performance, but for shorter runs in other theatres the payout may be sooner. Discuss with the person that hired you when you can expect to be paid.
There are definitely downsides to being self-employed. You do not have the safety nets that come with being employed, such as vacation days, PTO, or sick days. If you are not working, there is no money coming in. However, it does mean that you get to set how much you get paid, work the hours you want, and have much more flexibility in your schedule. As an artist, it also opens you up to working with a wider range of collaborators, particularly at the fringe theatre level where the majority of the work will come from. It also does not limit you from being employed. You can be self-employed and employed by a company at the same time.
If you are self-employed you need to sort out your own taxes at the end of every tax year. It can sound daunting, but if you just a little bit organized, it is manageable. You have 8 months to do your taxes: from April until January of the following year.
The two main pieces of advice are:
- Invoice for everything
- Keep records of everything
For every freelance job that you do be sure to send a proper invoice and keep a copy of the invoice for your records. This will make life so much easier when calculating your income.
For every expense that is even remotely work-related, keep a receipt of how much you spent. Especially if you are in the arts or an actor you can deduct these on your taxes. Things like grooming (ex. haircuts, etc), subscriptions (ex. memberships to industry groups), and certain bills (ex. mobile phone or internet) can count as deductions entirely or partially if you use them for work.
The flip side of deducting as much as you can from your taxes is that your income after taxes is lower, meaning that down the line if you want to do something like buy a house (HAHA) or even rent a flat it will look like you make very little money and thus are not financially reliable. It is a balancing act between paying as little tax as is reasonable without looking completely impoverished to financial institutions.
If this seems very overwhelming and you would rather have a professional do your taxes, hire an accountant. You will still need to keep receipts and invoices, but you can just hand them over to your accountant to sort out and calculate. Also, an accountant's fee is tax deductible. I recommend Theataccounts as they are reasonably priced and they work specifically with freelance theatre practitioners and theatre companies.
Final note: keep your tax returns for at least 5 years. Property management companies, landlords, loan officers, and mortgage brokers will usually want to see 3-5 years of taxes or accounts.