Just starting out?
If just starting out as self employed then you need to register with the Inland Revenue within three months of commencement or you may incur a £100 late notification penalty. This is done by completing a form CWF1 or visiting an accountant who, as well as completing the form for you, can advise you on various other issues such as Nation Insurance Contributions, VAT, record keeping and what expenses can be claimed.
Often Actors can have other part time employed work or be in receipt of a pension, which may be taxed at source under PAYE, or other sources of taxable income. Each of these may affect the individual’s tax status.
National Insurance Contributions
There are various types of National Insurance Contributions, the most common being class 1, class 2 and class 4.
Class 1 contributions are contributions deducted at source through PAYE and although usually relate to employed individuals, can also be deducted from self-employed individuals working in theatre and television.
Class 2 contributions are self-employed fixed contributions and are currently £2.65 per week.
Class 4 contributions are an additional contribution that the self-employed pay and are a percentage of their income. This is currently 0% for the first £7,605 of net income after expenses, then 9% on £7,605 to £42,475 and 2% on income above this.
Often performers may end up paying a combination of all three classes and may therefore end up paying too much national insurance. To remedy this, depending on the amounts involved, an adjustment is either made on the tax return or class 2 and 4 contributions can be deferred so that the contributions office can make a separate assessment of the correct amount due. This assessment is usually issued about 12-18 months after the year end and can therefore be an additional hardship for the individual, which he had not provided for.
VAT (Value added tax)
If your turnover is in excess of £77,000 in any cumulative 12 month period then you should notify the vatman and probably have to register for vat. This means you then have to add vat to all your fees and account for these to the vatman. If notification is not made within one month the individual may incur a penalty based on the tax due. There are also more strict rules for accounting and penalties for late returns
Just starting out? See the final part of our blog post soon……
Kevin Beale – October 2012
The content of this article is intended for general guidance only and represents our understanding of current law and HM Revenue & Customs practice. No responsibility for loss by any person acting or refraining from action as a result of this article can be accepted. We cannot assume legal liability for any errors or admissions this article may contain.