You may have heard that self-employed people get to claim expenses back against their tax bill. Now, this can be a daunting prospect, especially when you take this task on for the first time, but let’s take a look at a few things you can claim for and the overall logic behind this methodology.
This article has been written for Rockschool on behalf of MGR Music by Leigh Fuge
There is a piece of legislation known as the Tax Act and this act states that self-employed individuals are entitled to claim back expenses that are incurred “wholly and exclusively for the purpose of trade”. There is an important factor in this: the term wholly and exclusively for the purpose of trade says in black and white that these are things you CANNOT trade without. Let’s read this another way - they are things you NEED for your business to function.
As a self-employed musician or a music teacher, it just so happens that a lot of things we will come across from a spending point of view tend to fall into this category. There is no cap on what you can claim, but these claims must be demonstrated to the tax authorities to prove that the expenditure was directly resulting from your work as a musician or music teacher.
You can claim expenses for things you need for your business to function.
Your expenses are submitted each year as part of your annual tax return. We will be covering this in a forthcoming blog post along with many other teacher business topics so keep checking back. In the meantime, let’s look at some key expense categories.
If you use your car for your business, you can claim a percentage of its usage costs as an expense. This can be split into two main categories: mileage relief or overall expenses.
Overall Motoring Expenses
This is all your consumables including road tax, tyres, oil, insurance, petrol, servicing, repairs, cleaning, breakdown cover and any other costs that might be incurred from owning a car. To work out the amount you are allowed to claim you must first look at your total usage costs for the year.
Let’s say in a year you do 10,000 miles and altogether on fuel and everything else you spend £2000, to get your expense figure you need to work out how many miles are business miles.
To make this easy, let’s go with 2000 business miles and 8000 personal miles. So that means 20% of your car use was business related. Take your total spend and divide it by 100 to get 1% then multiply by the percentage you used:
£2000 / 100 = £20
£20 x 20 = £400
Your total business motoring expense for the year would be £400.
Mileage can be claimed are a flat rate as set out by HMRC:
45p per mile (Up to 10,000 miles)
25p per mile (All additional miles post 10,000)
If you choose to claim mileage allowance in this way you are unable to claim any other motoring expenses against the business. You cannot move between the two claim types - you must pick one and stick with it for the year. If you choose to claim mileage you must keep a mileage log.
If you use a part of your home as a dedicated work area (i.e., the room is ONLY used for business reasons and not personal reasons) then a percentage of the running costs can be deducted. This includes home insurance, heating and lighting bills, water costs and rental costs.
If the room is used for personal or leisure use as well as business, then no deductions are allowed.
There are two methods you can use to work this out. Firstly, find your total cost for everything in the house (Rent/mortgage, insurance, utility bills) and write this down, then use one of the following: 1. Total cost / total number of rooms in the house = Single room deduction 2. Total square foot area of upstairs + total square footage of downstairs = total house size Work out the square footage of the office space and then work out how much of a percentage this is of the total house size. This percentage is the amount you can deduct as an expense.
There are also other office-based expenses that you can claim providing they are solely for business use including:
Business percentage of phone line rental and usage
Advertising – leaflets, adverts, posters, online promotional costs
Publicity Materials – giveaway items such as picks, badges, stickers, promotional photos
Consumables – sheet music, guitar strings, drumsticks
Stationery – paper, printing costs, business cards, pens, books etc.
Instruments and Other Expenses
As teachers, our instruments are our tools of the trade. There are a range of expenses that we can claim based on our instruments such as:
Instrument repair costs
Cleaning materials for instruments
Instrument hire when needed
Music and instrument stands
You are also eligible to claim professional membership costs such as Musicians Union memberships or any professional membership that enables you to perform your business role accordingly.
This is just a short overview of some items that are eligible for expensing as a self-employed music teacher. Check the HMRC website for full guidance on business expenses and speak to an accountant if you are unsure about anything that you may or may not be able to claim.
Remember the golden rule: if you cannot trade without the item/service, it counts as a business expense.
About the Author:
This article has been written for Rockschool on behalf of MGR Music by Leigh Fuge, a professional guitarist, tutor and journalist from Wales in the UK. He has been working in the music industry for over 10 years as a touring and studio musician with various artists, guitar tutor and writer for many high profile guitar publications. Read more of Leigh's pieces relating to Rockschool here...