Essential Tax Tips Every Photographer Needs to Know
For photographers in the UK who prefer to spend their time creating art rather than the complexities of tax laws, accounting and tax completion can be daunting tasks. To make your professional life easier, here are a few critical tax-related tips that can make a big difference in how you pay tax in the long run.
Don't Always Get Your Money Up Front
A common problem for photographers who accept payment for commissioned work is that clients often want to pay part of the invoice up front, especially for expensive projects. If you work for a client for a long period, you may find that you've already been paid for an extensive amount of the project before it's even finished, leaving you with a lot of deductions to make and little money to pay tax on. If you're not comfortable with the idea of paying tax on the money that hasn't actually been paid to you, try asking your client to pay the entire invoice in one lump sum at the end of the project.
Use an Umbrella Company
If you don't want to get hit with a lot of tax every year, consider setting up an umbrella company. You can opt for a limited company, but it can also be a good idea to set up a small sole-trading company. Sole-trading allows you to split your work as a freelancer into specific projects. This makes it easy to calculate the amount of tax to pay by the end of the year
Keep Your Tax Records
If you prefer to pay tax at the end of the year, keeping good tax records is important. You'll need to keep receipts of everything you buy throughout the year, especially if they get used for work purposes, and register all the costs of running your business. This will save you a lot of time when you'll have to add up all your receipts for the tax year and fill out a tax return.
Don't Try to Write Off Every Little Expense
It can be tempting to try to get every expense you can on your tax return, but this can land you in trouble. Even if you have legitimate expenses that you can write off, avoid exaggerating the amount of money you spend on your business. You'll only end up getting audited in the future, which can cost you more in the long run.
Pay Attention to Tax Breaks and Incentives
If you need some extra incentive to keep going, the government is trying to attract more photographers to work in the UK with different tax breaks and incentives. As a freelancer, you can get some of the same benefits as a traditional employee by using HMRC's Business Income Tax Relief.
As you can see, there are a lot of different tax-related issues to take care of as a photographer in the UK. You will have to pay your fair share of taxes as a freelancer. If you want to avoid tax penalties, keep your records organised and pay attention to the laws and regulations.
These tips can help you keep your tax situation as simple as possible, but if you want to make sure you're doing everything you can to stay on top of your taxes as a professional, consider working with an expert to ensure you're on the right track.
Do you need accountancy services? Turn to 1 to 1 Accountants. We are an accountancy firm based in the UK, primarily serving small businesses and freelancers. Book an online meeting today!