On the whole, most will be better off for the 2017/18-tax year due to the personal allowance being increased by £500 and the basic rate band by £1,500. However, employed and self-employed workers will pay additional national insurance contributions offset-to-offset benefit.
Therefore self-employed musicians will be facing higher National Insurance rates, which will narrow the gap between them and conventional PAYE employees.
On average, self-employed musicians will face a extra 60p national insurance charge per week. The tax-free dividend allowance will be cut from £5,000 to £2,200. This will affect business owners, such as owners of music production companies, who pay themselves in dividends on top of a small salary.
The dividend cut is predicted to increase the net intake for the treasury, bringing in £930million in the 2021-22-tax year.
Basic rate self-employed musicians who receive £5,000 in dividends will be required to pay an extra £225 in tax from April 2018, while high rate self-employed musicians will pay an extra £975 in tax.
Self-employed musicians will now be required to pay two types of National Insurance:
1. A tax fund that will benefit the state pension
2. Job seekers allowance
The 2017-18-tax year will see self-employed musicians pay Class 2 National Insurance at £2.85 per week on profits between £6,025 and £8,164. Profits that exceed the £8,164 cap will be subject to Class 4 National Insurance at 12% on earnings between £8,164 and £45,000.
From April 2018 Class 2 National Insurance will be abolished and Class 4 National Insurance will rise from 9% to 10%. The national insurance will the rise by a further 1% in April 2019.
Much like employees, self-employed musicians will be entitled to a ‘personal allowance’, which allows earners to receive £11,550 in income during the 2017-18-tax year before having to pay income tax. However, unlike employees, self-employed musicians will have to pay income tax on the previous year’s profits, revenue after business expenses. It is possible to deduct certain costs from previous years in some circumstances.