Do I need to register for Self-Assessment?

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Regardless of age, we all have to pay tax on earned income. We do all have a personal allowance though (£12,500 2019/20) and if your income is below this amount then there is no tax due.

Your age is relevant when looking at whether there is an obligation to notify HMRC of a liability to Class 2 NIC as this is payable over the age of 16. When your profits are over £6,365 Class 2 NIC is payable.

How do I register for Self-Assessment?

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You can register online with HMRC who will then send you a letter with your 10-digit Unique Taxpayer Reference UTR and set up your account for the Self-Assessment online service

Alternatively, if you engage the services of an accountant, they are likely to include this registration in their service package.

When will I make my first tax return and pay my tax?

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Your first tax return for income that you earn in the year ended 5 April 2020 will be due for filing by 31 January 2021. Your first tax payment will also be due on this date.

What tax will be due on 31 January 2021?

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Tax on self-employed profit 19/20

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Payment on account towards 20/21 (this is calculated at 50% of 19/20 tax)

Do I have to make a payment on account for 20/21 if I haven’t earned any money from 6 April 2020?

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If you haven’t earned any money for 20/21 and don’t expect to or expect your earnings to be lower you can apply to reduce the payment on account to be half of the amount that you forecast your tax liability for 20/21 to be. If this is £nil then you can reduce the payment to £nil. If you engage an accountant then they can help you with this.

Can I claim any expenses against the income I have earned?

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Yes, you can claim for any expenses that you incur wholly and exclusively in conducting your business. These are typically:

– Clothing – only items that are purchased as costume and not worn ordinarily
– Research materials – books, DVD, on-demand TV, theatre, cinema etc. (if required to research a role/acting method)
– Computer costs
– Marketing expenditure – Spotlight, headshots, showreels etc.
– Travel costs – please note that if you are working at a venue for a period of time then your travel to and from the venue will probably be classed as ordinary commuting and not tax deductible
– Food and drink – if you need to stay overnight, on location or tour then these costs should be allowable
– Training – the cost of any training required eg voice coaching, acting classes
– Professional subscriptions – Equity, Accountancy, Legal advice
– Agent costs
– Telephone
– Use of home
– Hairdressing – if required for continuity

Do I need to register for VAT?

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You are only obliged to register for VAT if your gross fees are more than £85,000 in a rolling 12-month period. Some people choose to voluntarily register for VAT to enable them to reclaim the VAT they are incurring on business expenses (mainly agent commission and accountancy fees). Disadvantage of doing this is that you are introducing another tax with all the deadlines and inspections that can involve. You need to make a VAT return every 3 months.

How much should I be setting aside to cover my tax bills?

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We recommend that you put aside a portion of your income as it is earned to cover future tax liabilities.

For basic rate taxpayers (over £12,500 to £50,000), we recommend 20% and 25% of the untaxed income

For higher rate taxpayers (over £50,000), we recommend between 25% and 35% of the untaxed income

Is there anything I need to know about choosing an accountant?

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It is surprising but anyone can set themselves up in business as an accountant without any experience or training. We’re Chartered Accountants and that means we have had to undergo rigorous training and keep up to date. It also means we have to maintain insurance and have a professional body to monitor our standards and deal with complaints. Typically, using a Chartered Accountant will cost more than an inexperienced or unqualified accountant.

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