Freelance Make Up Artist? Here is our tax advice guide just for you. Whether you are starting out or just want to understand more about allowable expenses, here are some useful tips specifically for freelance make up artists.
THE FOUR ESSENTIALS OF SELF EMPLOYMENT
Let’s start by summarising the four essential elements of Self Employment:
- Visit the HMRC website and register as Self Employed;
- Keep a list and receipts of all business income and expenses;
- Complete Self Assessment before 31 January each year summarising your business income and expenses;
- Pay any Tax and National Insurance due by 31 January each year (and payments on account by 31 January and 31 July each year).
Register with HMRC as a Self Employed Make Up Artist
Whether you are a mobile make up artist, rent a room at a salon or have a make up room at home going self employed is the easiest way to kick start your career as a make up artist.
First things first, you must register with HMRC for Self Assessment and Class 2 National Insurance. This should be done as soon as possible after starting work as a Self Employed Make Up Artist but HMRC rules are that you must register by 5 October in your business’s second tax year.
You can register online as a Freelance Make Up Artist on the HMRC website. The process can take 10 days to complete upon which HMRC will post you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.
Self Employed Individuals are responsible for reporting their income to HMRC under Self Assessment by submitting a personal Tax Return by 31 January each year detailing your income as a Self Employed or Freelance Make Up Artist, the income tax and Class 2 & Class 4 National Insurance due as well as making a payment for the tax and NI due. Your tax return submitted by 31 January covers the previous tax year (a tax year runs from 6 April to 5 April). So for example, your tax return due by 31 January 2018 details your earnings between 6 April 2016 to 5 April 2017 and this will include your income as a Self Employed Make Up Artist as well as any other earnings you may have (such as rental income, bank interest or dividends).
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years tax bill, so make sure you budget for this additional payment too.
It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CWF1 to notify HMRC that you have a new form of income you need to report on. Again, you can do this online here and you will need your Unique Tax Payers Reference.
WHAT ARE ALLOWABLE EXPENSES?
Your trading income, somewhat deceivingly, actually means your trading profits (all your income less all your allowable business expenses). Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties.
Allowable Start Up Expenses for Freelance Make Up Artists
Starting any business usually involves some element of cost so it is worth understanding whether these expenses will attract tax relief before you start spending. Here is a list of typically allowable start up expenses relevant if you are a self employed Make Up Artist:
Make Up Equipment
You may need to invest in items such as a treatment couch, make up cases or beauty products. These are fully allowable and some may attract Annual Investment Allowance, which is another way of making tax savings. So keep all the receipts of your equipment so you can discuss deductions with your accountant.
Computer & Printer
You will probably need a computer & printer to manage your bookings, make product orders, manage social media or print out leaflets/brochures. Your computer and printer may be tax allowable either in full or a proportion of its value, so make a note and keep the receipt to discuss at tax time.
Having a website is so important and it gives you the chance to detail your services, prices, showcase your previous work and let people get a feel for your experience and personality. If you are considering investing in a website then it is worth noting that the website, domain and hosting again are all allowable expenses.
Allowable Ongoing Expenses for Freelance Make Up Artists
Once you have begun finding clients you will being to incur expenses on an ongoing basis as you run your business. Here are some of the ongoing expenses you which you should look out for as a self employed Make Up Artist and keep details of as they are generally tax allowable and reduce your tax bill:
Beauty and Make up Products
The cost of your ongoing make up business are all allowable expenses which includes makeup, moisturisers or even cotton wool.
Phone and Internet
The cost of a business phone (mobile and/or landline) and your internet is an allowable expense however if there is personal use then only a proportion of the contract costs can be claimed.
If you have a ‘uniform’ with your logo that you wear while you work, then you should be able to claim for this cost. Normal clothing is not allowed and neither is the cost of washing your clothes at home.
If you are a mobile make up artist offering home/on site visits you will incur the cost of travelling for your work. Keep hold of your receipts for trains, tubes or taxis as they should all be allowable expenses and help reduce your tax bill.
As a mobile make up artist you may need to use your car to travel to clients and you should note down the mileage as this falls under the category of travel. Record you miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.
Note – If you choose to rent a room at a salon you may not be able to claim for the cost of travel/mileage as this may represent your place of work. Make sure you take professional advice before claiming for travel/mileage as incorrect claims can result in penalties.
Whether you are a mobile make up artist or work at home, you may be required to take out some form of insurance to cover loss or damage. Again you will be able to claim this cost as an allowable expense.
If you opt to rent a room as part of a larger salon, then again the cost of doing so is an allowable expense and will reduce your taxable income.
Use of Home
If you choose to set up a make up room at home then there are rules that will allow you to claim an amount for the running costs of doing so from your home as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.
Alternatively, HMRC allows you to claim a flat rate of £4 per week for using your home for work purposes and you don’t need to substantiate this claim with receipts.
You may opt to take courses to improve your skills or learn about new techniques. These will probably be tax allowable so keep your receipts ready for when you need to submit your tax return. If you need to travel to your course or stay overnight as part of the training these costs are also tax deductible, as well as the cost of a basic meal for lunch/dinner. Take the time to collate your receipts or note down mileage so you can discuss your claim against your taxable income with your accountant.
Any marketing you do (online or offline), paid ads or anyone you pay to help you with your marketing is also fully allowable so make sure you download or ask your marketing assistant to send you an invoice before you pay them.
Accounting & Bookkeeping
Keeping accurate business records will help to avoid missing any entitlements or tax relief that you may be eligible for. Using a cloud based accounting software such as Xero, Quickbooks or Sage will make life easier, so if you do choose to sign up the cost of the monthly subscription is fully tax allowable. Then, if you choose to use an accountant to complete your self assessment tax return again their fees will be an allowable expense. Keeping accurate records will definitely help keep their fees down too as well as giving them all the information they need to make sure you receive all the deductions and reliefs to reduce your tax liability.
It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account is an allowable expense.
RECORDING YOUR BUSINESS TRANSACTIONS
It is likely you may be paid in cash or via bank transfer and, like any self employed sole trader, it’s important to keep accurate business activity records and be aware of any entitlements or tax relief that you may be eligible for. Doing so will make life easier when the time comes to completing Self Assessment. Incomplete or inaccurate records will demand more time and hike up any accounting costs. Don’t forget that failure to declare all forms of income could result in prosecution and a fine from HMRC. Accurate returns are important as they affect a person’s eligibility and ability to get things like mortgages and other types of credit finance.
A simple spreadsheet which records your income and expenses is a great start to keeping your business transactions logged and organised. You read some of our tips to keeping your accounts organised here.