Additional income on top of day job

stevep1987

Hello,

I wonder if someone could help me work out my options? I have a full time job, earning 25k py, 33k after bonuses. As a hobby I make music and DJ on the side. Historically it has just been for petrol money etc but since growing in popularity I've signed with an artist agency (in May) and depending on how busy the month is I'm earning between £400-800pm. This is probably going to increase over the next 6months-1year until hopefully I can do it full time.

So - when it was just cash in hand, £50 here and there it really wasn't worth my time doing everything by the books. Now I can obviously see I should be doing something to declare my additional income, especially since I invoice promotors for my services etc. I've probably left it way later than I should have!

Does anyone have any experience in this field? Is it just a case of recording all of my incomings/outgoings then filling in a self assessment form every year? Or is the best bet setting myself up as a company and doing it that way - I've looked at the HRMC site a lot but nothing quite seems to fit my situation.

I should note that I DJ/produce in a duo with a friend, in case that changed the situation. He currently doesn't declare anything either.

Many thanks in advance for your responses and time!

Steve

phill99

Don't set yourself up as a Limited Company. It really is far too onerous when you will be earning a relatively small amount.

You need to keep a record of your income and expenses.

Expenses eould be agency fees, Advertising, business cards, Letterheads, postage, other stationery, equipment costs, equipment maintenance, motoring costs, Public Liability Insurance, mobile phone, website costs, music download costs from spotify etc, professional membership costs etc etc.

I keep a log of all my payments and expenditure on a month by month basis and keep hold of all receipts, copies of invoices etc.

Tjen give it to your acvountantant at the end if the year. He will add things you had no idea you could claim for ad in the first couple if years you should pay very little tax on this.

stevep1987

Great, thanks Phil. Appreciate the reply. Would you recommend getting an accountant for this though? It would probably only cost a few hundred to do an end of year return right? Is it easy to do yourself?

I've been keeping records of all invoices and incoming payments - but I admit I haven't been keeping receipts for anything - petrol to gigs is the main cost at the mo.

phill99

I can guarantee an accountant can save you more money than they cost. It wont cost you more than £200 but may be the best £200 you spend.

You need to be very disciplined about record keeping or you will end up paying too much tax.

You may want to keep a mileage log of all DJ related trips in your car including to gigs, to clients, to suppliers etc.

Also make sure you have business insurance on your car or you may find yourself on the wrong side of the law.

stevep1987

Thanks again Phil. One thing I don't understand however is why you would get tax benefits for purchasing something without being registered as a business. What's to stop someone claiming tax back on a camera for example, if all he does is buy a £2k camera and sell a few photos to his mates? I know that's an extreme example but I guess I'm just wondering where the line is?

phill99

stevep1987 wrote: »

Thanks again Phil. One thing I don't understand however is why you would get tax benefits for purchasing something without being registered as a business. What's to stop someone claiming tax back on a camera for example, if all he does is buy a £2k camera and sell a few photos to his mates? I know that's an extreme example but I guess I'm just wondering where the line is?

Because when you do your tax return in April 2015, you will also have to do supplementary sheet for money earned through self employment. On that you will list income, costs of purchases and the resultant profit. Depending on the cost of purchase, you will either get the full cost of the item classed as an expense, or it will be 'written down' ie you get a percentage if it set off against tax each year eg 25% of the item for each year for 4 years.

This is why you need an accountant.

Suarez

phill99 wrote: »

Because when you do your tax return in April 2015, you will also have to do supplementary sheet for money earned through self employment. On that you will list income, costs of purchases and the resultant profit. Depending on the cost of purchase, you will either get the full cost of the item classed as an expense, or it will be 'written down' ie you get a percentage if it set off against tax each year eg 25% of the item for each year for 4 years.

This is why you need an accountant.

Sounds like your talking about depreciation which is not an allowable expense.

They could claim the full cost of the camera under capital allowances.

As for the example of selling a couple of photos to friends and claiming the cost. You are expected to trade and make a profit. You will come unstuck when explaining that you have purchased a 2k camera and only achieved a small income.

martindow

Regarding the accountant I agree it is a good idea to see one in your first year. Assuming the business stays the same you then know which expenses are allowable and which are not and have an example of how to do the tax return yourself in subsequent years.

You will have to do most of the work in any case listing income and expenses. Accountants are very expensive if you just give them a shoe box full of jumbled receipts.

Percy1983

Suarez wrote: »

Sounds like your talking about depreciation which is not an allowable expense.

They could claim the full cost of the camera under capital allowances.

As for the example of selling a couple of photos to friends and claiming the cost. You are expected to trade and make a profit. You will come unstuck when explaining that you have purchased a 2k camera and only achieved a small income.

Thats the main answer, My business made a small loss in year 1 due to purchase of equipment and profit in year 2 and a small loss in year 3 due to a massive upgrade of equipment which is leading to a massive profit in year 4 and beyond all being well.

As mentioned if you buy all the equipment but never work by definition you are not trading.

As an accountant I will say you don't need an accountant as such if you are confident with the rules and the paperwork is straight forward. Of course if you are unsure on rules etc as mentioned a a couple of quid on an accountant can save you money and just give you peace of mind.

stevep1987

Thanks everyone. Seeing as I only started receiving regular income in May (and have records of it from then anyway) - there won't be anything for me to do just yet apart from recording everything I'm assuming. As there won't be any income from April 2013 - April 2014, I won't have to do anything until January 2016, right?

phill99

Suarez wrote: »

Sounds like your talking about depreciation which is not an allowable expense.

They could claim the full cost of the camera under capital allowances.

As for the example of selling a couple of photos to friends and claiming the cost. You are expected to trade and make a profit. You will come unstuck when explaining that you have purchased a 2k camera and only achieved a small income.

No. I'm talking about writing down allowances.

http://www.hmrc.gov.uk/capital-allowances/plant.htm#1