What Expenses Can Musicians Claim on Tax?

What is it about musicians and tax? George Harrison famously denounced it in his song, Taxman, The Rolling Stones went into exile in France because of it, and, in Sunny Afternoon, The Kinks’ Ray Davies complained darkly that the then Inland Revenue had “taken all my dough”. That was during the super-tax era of the 1960s and 70s, when rates for high earners were 90% or more – but tax bills have been a headache for musical geniuses through the ages. Beethoven himself is alleged to have falsified his tax returns, and Wagner is reported to have once dressed as a woman to give the Viennese revenue authorities the slip.

Nowadays it doesn’t have to be like that. Of course musicians, like any other citizens, are still legally obliged to pay tax on their earnings, but there’s more free advice and professional help available than ever before to ensure they pay their dues without missing out on important tax breaks.

What musicians can claim as expenses

Broadly, reasonable expenses that are necessary to run an effective business are deductible. They include:

• the cost of buying and maintaining instruments and equipment
• fees for recording studios; the cost of recording software
• travel to and from performances or auditions
• website, management and publicity fees; hotel expenses
• costumes, make-up and more

But as the annual 31 January deadline looms for the self-employed to complete their returns and pay up, many musicians are still unsure about what they can and cannot claim, says Andy Levett, an accountant at the firm HW Fisher, which specialises in people in the creative industries. “Often a musician will not realise they may claim capital allowances on instruments or equipment they owned prior to becoming self-employed, or that were gifted to them,” he says.

Clothing claims can be especially contentious: “Some years ago they were the subject of a landmark case on what counts as a business expense generally,” says Andy. “The conclusion was that clothes can only be claimed if they could not reasonably form part of one’s everyday wardrobe. So stage wear needs to be unconventional enough to avoid a possible disallowance.” He adds that make-up specifically for the stage or screen can be claimed, as can accessories, merchandise or event-specific hairdressing, but he cautions: “It’s important to be discriminating and not simply claim a percentage of total clothing costs for the year.”

Using different expense categories

The often complex tax profiles of musicians reflect the varied nature of an industry where so many derive income from a combination of regular, freelance and teaching work. “A performing musician will tend to claim more on travel costs, while a composer will have more costs in relation to running a studio” says Andy. “All will tend to claim for cost of instruments and other equipment, as well as general costs such as a business portion of phone bills. Band leaders will have fees for other musicians and producers will have session fees.”

Essentially, any cost incurred due to business activities can be considered and most may be claimed, with a few exceptions.

One of the most pitfall-strewn areas is the cost incurred while working from home. “Some musicians may be aware of the fixed monthly allowance that may be claimed, but this is limited and if they have a room or space set aside as a studio and/or an office, they may claim a portion of the actual home costs based on the number of rooms or floor area. This includes rent or mortgage interest, council tax, utilities and insurance.” He cites a typical example where a musician has one room of a three-bed house set aside as a studio/office. Bathrooms and hallways are ignored, so a fifth of those costs may be claimed.

On the question of expenses for entertaining business contacts, the rules are clear. “They are often mistakenly claimed by people in all sorts of professions but are actually blocked. So the cost of dining or drinking with a business associate is not in fact allowable. HMRC accept they are often a genuine business cost but they are disallowed by statute, presumably to prevent abuse.”

Beware of claiming medical expenses, too. “A musician will often assume that treatment to allow them to perform will be permitted – for example back surgery for a pianist – but this is usually not allowable as it is considered as having a dual purpose of restoring the individual’s health.” If there is treatment that simply maintains or improves an ability to play but does not have any real benefit in everyday life then it may be allowable, but care needs to be taken.

Another vexed issue affects music tutors who teach in schools. “They often find it difficult to understand that the cost of travel from home to the school is not allowable,” says Andy. “But HMRC consider the school to be the ‘base’ for this type of work and therefore the cost of the trip is disallowed as commuting. For most other activities a musician’s base will be deemed to be their home and so travel for these activities is allowable.”

Tips on effective tax accounting and record keeping 

For those setting out on musical careers, Andy advises keeping a record of everything spent, right from the beginning. Soon it will be law for most small businesses to keep digital records, so getting an app such as Xero, Quickbooks or Freeagent is recommended.

He also suggests that having a separate bank account for business transactions will assist with digital record keeping. Additonally, completing a tax return as soon after 5 April as possible allows you time to review all of the expenditure to ensure that you are claiming everything that is allowable, as well as giving you plenty of warning of as what will be due to HMRC.

Finally, he advises setting aside money for tax as you earn. 20% of the gross should be enough, although if your expenditure is high or the income low that may be too much.

Ensuring your digital record-keeping is up-to-date will also help you know what your tax liability for the year is looking like.

Daniel Trodden is Principal Tuba for the BBC National Orchestra of Wales, but he also works for other orchestras where he is paid as a freelancer. In addition he teaches, both as a private tutor and as a staffer.

“With a complex tax situation like mine, an accountant is absolutely vital,” he says. “Right from the off, when I graduated, I did a tiny bit of freelance just to keep going, and I realised I didn’t have a clue what I was doing tax-wise. I just put it through and let the accountants decide. It’s a great comfort that someone is taking care of it.”

Although he admits to being hazy on what is deductible in terms of meals or medical expenses, some of the things he is able to claim have been a pleasant surprise – such as gig and cinema tickets, which are allowable as research. He says there’s also a creative dividend to having an accountant: he avoids stress as the tax deadline approaches, and is free to concentrate on his music. He adds: “Every January you hear your colleagues saying ‘I’m dreading doing my taxes’. I think I probably pay a little over the odds for my accountant, but it’s amazing - I send him envelopes with crumpled up receipts and then he sends me something back to sign, and that’s all I have to do.”

Daniel reckons that the music business education he received was heavily skewed towards self-promotion, with too little about tax. He says: “I think there’s probably a case for more about tax for young musicians, from what I gather it still isn’t being taught in depth.”