How to Tackle Self-Assessment: A Step-by-Step Guide for Creatives

 

The UK’s creative sector, which include fields such as film, fashion, performing arts, and publishing, relies heavily on project-based work. Because of this, the industry's rate of self-employment is far greater than the overall economy's. According to government data, 16% of UK workers are self-employed, however 32% of workers in the creative business are.

For creatives, navigating the world of self-assessment can seem as daunting as mastering a new art form. Whether you’re a freelancer, artist, or consultant, understanding how to manage your taxes is crucial for maintaining financial health and staying compliant. Here’s a step-by-step guide to help you tackle self-assessment with confidence and ease.

1. Understand What Self-Assessment Is

Self-assessment is the system HM Revenue & Customs (HMRC) uses to collect Income Tax. If you’re self-employed or have other sources of income not taxed at source, you’ll need to file a self-assessment tax return each year. The purpose is to declare your income, claim any eligible expenses, and claim any relevant expenses.

2. Register for Self-Assessment

Before you can submit a tax return, you must register with HMRC. If you're newly self-employed or haven't filed a return before, you need to register by October 5th of your business's second tax year. For example, if you started trading in July 2023, you’d need to register by October 5, 2024. You can register online through the HMRC website or by phone.

3. Gather Your Financial Records

Organize all relevant financial records, including:

• Income: Invoices, contracts, and records of payments received.
• Expenses: Receipts and documentation for business-related expenses, such as art supplies, software subscriptions, or studio rent.
• Bank Statements: Bank statements that reflect your income and expenses.

Keeping accurate and detailed records throughout the year simplifies the process. Consider using accounting software to track your finances and generate reports.

4. Understand What You Can Claim as Expenses

As a creative, you can claim various expenses to reduce your taxable income. Common expenses include:

• Art Supplies and Equipment: Paints, canvases, or software necessary for your work.
• Studio Costs: Rent, utilities, and maintenance for your workspace.
• Professional Fees: Memberships to professional bodies or training courses.
• Travel Expenses: Costs incurred while traveling for work, including mileage, accommodation, and meals.

Make sure to differentiate between personal and business expenses; only business-related costs are deductible.

5. Complete Your Tax Return

You can complete your tax return online through the HMRC Self-Assessment portal or by filling out a paper form. The online system is generally more efficient, offering guidance and calculations as you go.

• Personal Details: Enter your personal information and National Insurance number.
• Income: Report all sources of income, including freelance work, commissions, and any other earnings.
• Expenses: Input your business expenses to calculate your taxable profit.

Ensure that all information is accurate and complete. Mistakes can lead to delays or penalties.

6. Review and Submit

Before submitting, double-check all entries to ensure accuracy. Review your calculations and verify that all income and expenses are correctly reported. Once satisfied, submit your return electronically or mail it if using a paper form. Keep a copy of your return and any supporting documents for your records.

7. Pay Your Tax Bill

After submitting your return, HMRC will send you a tax calculation showing how much you owe. The payment deadline is usually January 31st following the end of the tax year. For example, for the 2023/24 tax year, the deadline is January 31, 2025.

If you have difficulty paying the full amount, contact HMRC as soon as possible to discuss payment options or set up a payment plan.

8. Seek Professional Advice

If you’re unsure about any aspect of self-assessment, consider consulting an accountant or tax advisor. They can provide personalized advice, help with complex situations, and ensure that you’re compliant with tax regulations.

Handling self-assessment doesn’t have to be overwhelming. By understanding the process, keeping thorough records, and seeking advice when needed, you can manage your tax obligations effectively. With these steps, you’ll be better equipped to focus on your creative work while ensuring your financial and tax affairs are in order.