The Essential Actor’s Guide to Paying Tax in the UK

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Photo Source: Joelle Avelino

It’s the dirty little secret they never tell you about at drama school: Actors need to know about tax. You may be very familiar with the RSC, the BBC, and RADA, but it’s time to get to know the workings of HMRC—that’s Her Majesty’s Revenue and Customs, aka the dreaded taxman to you and me.

However, fear not—doing your taxes need not be terrifying. With a little bit of time and effort, they can be totally bearable, and Backstage is here to help.

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What do actors need to know about taxes?

Taxes are a proportion of your earnings you give to the government to pay for essential services.

These include the National Health Service, social security, roads, defence, schools, and so on. As an actor, if you’re getting paid, you need to pay taxes. It’s not only a moral responsibility—it’s also a legal requirement, so getting it right is important.

How much you pay depends on how much you earn and what income tax band you fall into. Generally, the more you earn, the more you pay. The first £11,850 you earn each year is tax-free but after that, you’ll start owing moolah to HMRC.

Most actors pay tax through either Self Assessment, where it’s up to you to pay the tax you owe, or via Pay As You Earn (PAYE), where your employer takes the tax off your earnings at source so you don’t have to. For many, it’s a combination of both. As an actor, you may well be doing jobs other than acting, and that usually involves paying tax via PAYE, but for most acting jobs you’ll be classed as self-employed and you’ll have to sort out your own tax. Whatever the method, you will need to register any income with HMRC, and it’s crucial you know how and when your tax is being paid.

What is self-employment?

Self-employment means you work for yourself rather than for a single employer.

In other words, it’s where you source your own work (including through an agent or manager) rather than taking a monthly salary in a “normal” job. In the UK, most actors are self-employed. It’s important to register as self-employed with HMRC within six months of the end of the tax year in which you began working—or earlier if you’re well-organised. So, if you start working in July this year, you need to register with the taxman before October 2020. Even if you only work for a single day on a self-employed basis, you have to register with HMRC.

You can register online via the gov.uk website hereThe HMRC website generally is quite helpful, and once you’re registered they’ll send you a confirmation and provide you with your Unique Taxpayer Reference, or UTR. This is a unique reference for your tax affairs—note it down, as you’ll need it for any contact you have with HMRC.

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What is Self Assessment?

Self assessment means just that: The taxpayer does all the work for HMRC and they then send out tax demands based on figures that you provide.  Everyone who’s self-employed needs to submit a tax return by 5 April each year, which needs to be completed by 31 January. That’s why self-employed people often look sweaty and nervous around the end of January.

The last complete tax year (2017–2018) started on 6 April 2017 and ended on 5 April 2018. The 2018–2019 tax year ends on 6 April 2019, and the 2019–2020 tax year begins immediately after.

In essence, all that’s required is for you or your accountant to fill out your earnings online and to provide information regarding any expenses that need to be deducted. If HMRC isn’t happy with your handiwork they can decide to investigate your affairs. That’s not ideal, so it’s a good idea to get it right the first time.

If you’ve done a job where your employer has already taken off tax (known as taxing at source, or via PAYE) then that has to be included on your Self Assessment tax return. If your tax liability is over £1,000, or if not much of your tax is collected at source, then you may be required to make an installment for next year’s tax as well on 31 January.

In theory, the Self Assessment system is quite straightforward, but it can seem daunting, especially if you’ve never done it before, so many people opt for letting an accountant do it (see below). Failing to file your return on time will result in an automatic £100 fine, with further penalties depending on the length of delay. It’s worth looking at the HMRC's online help guides.

Do child actors have to pay tax?

Yes, child actors have to pay tax on their income, and they have to register with HMRC, just like an adult.

They can also claim expenses. However, unlike adults, child actors do not have to pay National Insurance until they’re 16.  

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Should I get an accountant?

Getting an accountant may seem an unnecessary expense, especially at the start of your career, but having a specialist look at your finances can save you money.

You can hire an accountant for a one-off payment of around £300, or a smaller initial outlay if you want to pay per month. If you hire someone with expert knowledge of the industry you’re working in—for example, entertainment and the arts—then they’ll know the expenses you can claim and can help keep your tax bill down.

Usually, word of mouth is the best way to find a good accountant, so ask your friends and fellow actors. You’ll know you’ve found a good one when they save you more in tax than they charge in fees. Plus, it’s always worth remembering that your accountancy fees are tax-deductible.

What are expenses and why are they important for actors?

Expenses are costs incurred in doing your job, like paying for headshots, which you can offset against your tax bill.

Repeat after us: Expenses are your friend—look after them and they’ll look after you. As we’ve learnt, HMRC will take a cut of everything you earn. So, if you earn £50,000, you’ll owe something like £10,000 in tax—but before you write the taxman a cheque with tears in your eyes, it’s time to take your expenses off that £10,000 bill. Yes, expenses enable you to reduce the amount you owe to HMRC. As we said, they’re your friend!

First, the legal bit: The law states that any expenses claimed are to be “wholly and exclusively incurred in the performance of the business.” That means that whatever expenses you claim, you have to be able to argue they are only incurred for business use—in other words, in your job as an actor. Easy, right? Well, maybe, but it’s not as straightforward as it first appears.

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What expenses can I claim for?

You can claim for most, but not all, work-related expenses.

Most travel costs incurred for acting and performance-related activities should be deductible. This includes travelling from home to audition venues, rehearsals, on research trips, and to the performance venue, plus any reasonable subsistence costs. If you’re mainly travelling by tube or bus in London, Oyster card costs are allowable for the cost of the journey, and TFL’s weekly travel summary can be used for your accounting records. Handy, eh?

Subsistence (food and drink) isn’t normally allowed as a business expense, as everyone has to eat, so it can’t be classed as being incurred “wholly and exclusively.” However, you can claim subsistence if a business trip is outside the normal pattern of travel—for example, if you’re on tour, filming away from home, or working somewhere out of the ordinary. Generally speaking, if you’re 10 miles or more away from home, then it’s likely to be allowable.

If you buy items of clothing or shoes for a role which you’d reasonably class as costume, then you can deduct that for tax purposes. Think about what you’re using the clothing for—if you wear that lovely jacket at home then you can’t claim it as an expense, OK? The same goes for props. Also, if you are reimbursed for any costumes, then this reimbursement must be included as income.

If you work from home, you can include in your expenses a portion of the running costs of your home: gas, electricity, telephone, broadband, rent, council tax, mortgage interest, insurance, and so on.

Other useful things you can claim for include agents’ fees, subscriptions to trade journals like Backstage and Spotlight, membership of Equity and the Musicians’ Union, and even the cost of headshots. You can also claim for your laptop, stationery, website design, acting classes, your showreel, and many more things.

One common tax pitfall is claiming for buying your agent or a prospective employer dinner or a drink (otherwise known as schmoozing). You can’t claim them as expenses as it’s classed as entertaining and is therefore not allowed. However, the good news is that play texts, books, biographies, scores, downloaded music, and backing tracks are all deductible. So, now you know.

Before you go too far, though, do remember: Overclaiming on expenses can lead to HMRC breathing down your neck, so don’t go overboard. Think about the term “reasonable expenses”—if you think you’re being unreasonable, then you probably are.

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How important is it to keep a record of tax expenses?

Keeping a record of your receipts is really important.

If the taxman takes an unusual interest in your finances, they’ll want to see proof of spending, and that means receipts. You can keep a physical copy of everything you spend, but most people don’t like shoeboxes of paper cluttering up their homes. Luckily, there are lots of apps now that can help— either by linking to your bank account or taking a quick snap of receipts. It might be dull, but record-keeping is crucial when it comes to staying on top of your taxes.

How do I keep HMRC happy?

Pay your taxes and don’t overclaim on expenses.

Simple, eh! Get expert accountancy help if you need it, and as a general rule, if you can’t prove the expense, don’t claim for it.

How do I pay HMRC?

You can pay HMRC via bank transfer, Direct Debit, bank giro, online or telephone banking, and by cheque.

Any tax you owe must be paid by or on 31 January (31 October for returns filed by paper) following the end of the tax year. Delaying paying HMRC could cost you interest and late payment penalties, so make sure you pay up!

Is there anything else I need to know about tax?

Saving money for your inevitable annual tax bill as you go along takes discipline but is worth it in the end. As a general rule of thumb, putting aside 20 percent of everything you earn isn’t a bad idea.

What if I can’t pay my tax?

If you do get yourself in a situation where you can’t pay your tax or you’re late with your tax returns, then you must contact HMRC and discuss it.

You will not be the first. The key rule here is: Don’t panic, and don’t put your head in the sand—the problem is not going to disappear. Be honest and frank about your problems when you call them, and try to work with them to come up with a realistic solution. They are not the tooth fairy —but neither are they monsters.

What does Benjamin Franklin say?

“In this world, nothing can be said to be certain, except death and taxes.”

Ready to get to work? Check out Backstage’s London audition listings!