Most voiceover artists in the UK will be classed as self-employed. This means that they will be responsible for the completion and filing of their own self-assessment tax returns each year, making sure that these are done accurately and on time.
Becoming a voice over artist
Step 1- Register with the HMRC
The first step for any voiceover artist starting to offer their services is to register with HMRC as self-employed – even if this work is done on a part time basis whilst working another employed job, and regardless of how small or large the income from the work. It is also a good idea to contact the tax credits office and inform them of your change in circumstances and potential income, as this may affect any tax credits you currently receive or make you eligible for other tax credits. It is important to register as self-employed with HMRC within 6 months of the end of the year in which you became self-employed, as failing to do so in this time period may result in a £100 fine.
Registering as self-employed is important as failing to do so will mean that you are not eligible to deduct expenses from your tax bill, as any voiceovers will instead be seen as a hobby, rather than a job.
Registering as Self-Employed
Although there are different ways to register your self-employed voiceover business, the most simple in terms of paperwork and financial obligations is to register as a sole trader. Doing this can be done via the gov.uk website, and offers a greater degree of privacy than registering as an incorporated business, where business details are published via Companies House.
However, it’s important to remember that becoming a sole trader means that you and your business are effectively the same when it comes to legal and tax matters, and thus if the business goes into debt, you are personally liable and could have to forfeit personal assets to pay, if required.
Once HMRC has been informed of your changed employment status, it is important to keep careful records of all expenditure and ensure that these are kept in an organised and up to date way, as this will ensure that any claims can be verified as eligible businesses expenses. Although such evidence does not need to be submitted with your self-assessment tax return, HMRC may ask to check your claim, and keeping tidy records helps this process to occur as quickly and pain-free as possible.
As income gained from self-employment can vary year to year, it is advised that any records are kept for a minimum of 5 years after the January 31st submission deadline of the relevant tax year, as this will help to show how any estimations are made in regards to expected income, should this be needed to make a claim to reduce a payment on account, or underestimated when compared to actual income.
In addition to keeping receipts for all expenses claimed, it is a good idea to pay for all such expenses in a way that a trail will be left. This means that using a card or cheque is preferential to paying for things with cash, as here they will show up on a bank statement, with a record having been generated of their purchase.
What can you claim?
The types of services and purchases that can be claimed as expenses and thus deducted from your tax bill as a voiceover artist are often more numerous than may be expected, with it being possible to deduct any commission, administration and legal fees and business services when arriving at net earnings that will be subject to taxation, alongside research for voice roles (which may include theatre or cinema trips), marketing costs, travel (relating to voiceover jobs), and professional subscriptions. Under HMRC guidelines, any such expenses must be incurred “wholly and exclusively” in relation to the work carried out, and any deductions that occur as a result of expenses should only be given to the extent that an expense has actually been incurred.
However, the nature of voiceover work means that the use of PC equipment and use of a studio (often located in the home) may be required in order to produce products. For these, it is possible to claim for a proportion of the cost, depending on how much of their usage relates to your voiceover artist work.
Unlike employed people earning under PAYE whose tax and other HMRC obligations are deducted at the source, self-employed people are responsible for these payments themselves, and, as such, it is a good idea to save money from income on a regular basis (either monthly or weekly) and put it aside in order to pay tax when it’s due, rather than have to forfeit a large lump sum from any income or savings near the tax deadlines. The tax rates that apply to income earned from self-employment are the same as those from PAYE employment, but self-employed people also need to factor in National Insurance contributions to their outgoings.
Class 4 National Insurance is currently charged at 3 rates for the 2017-18 tax year;
· 0% on profits under £8164,
· 9% on profits between £8164 and £45,000,
· 2% on profits over £45,000
In addition to Class 4 contributions, self-employed people with profits over £6025 will pay Class 2 National Insurance contributions at a flat rate of £2.85 a week for the 2017-18 tax year, which will be the final year in which this is paid, as the government has announced that Class 2 contributions will be abolished from the start of the 2018 tax year.
It is also important to put a further amount of any income received aside to cover any potential tax liability that may arise the following year in the form of a balancing payment, as well as other payments that would automatically be deducted under PAYE that may be forgotten about, such as student loans.
Declaring all your income
Remember that, although filling out a self-assessment return may seem to relate to any earnings from voiceover jobs that fall under self-employment, if you are still working another job (whether on a full- or part-time basis) that is taxed under the basis of PAYE, any earnings from this job must also be filled in in the relevant location on the self-assessment return, in order to allow HMRC to get as clear a view as possible on your financial situation.
Paying tax on time
As obvious as it may seem, a often overlooked step for any self-employed voiceover artist, is to pay tax on time, with failure to do so incurring an initial £100 fine, followed by daily fines of £10. If your tax bill for the year is more than £1000, and less than 80% of this has already been deducted at the source, then you will be required to make a ‘payment on account’. A ‘payment on account’ is one of two payments made by self-employed individuals in the year, and seen as helping to spread the cost of the year’s tax.
How tax due is calculated
The payment amount is determined by looking at your previous year’s tax bill, with each payment on account usually being 50% of the amount of the previous year’s tax bill. However, the first instalment on January 31st is also due on the same day as your ‘balancing payment’, which involves paying any tax still due on the previous year’s tax. This often means that the January payment is more than that of the July payment, and may be more than is expected, so it important to budget for this throughout the year. This is especially true of the first January payment you will pay as a self-employed voiceover artist, where you will be expected to pay your full tax liability for your first year of trading, plus your first payment on account for the current trading year.
Following the initial January payment, subsequent July payments will simply be the expected payment on account, with future January payments being payments of account plus balancing payments, though with these likely to be considerably less than the first. It is also important to note that these payments on account only cover Income Tax and Class 4 National Insurance contributions, but not other payments that may need to be made, such as student loan repayments or Capital Gains Tax, with you needing to save separately to make these.
Contact us for expert tax advice for voice over artists