Disclaimer: this article does not constitute financial advice. Think of it more as a few organisational pointers…

The deadline to file your return and pay your tax bill is 31^st January 2024, for tax year 2022-23. That means that if you were registered self-employed between 6th April 2022 to 5th April 2023, you will need to file a return, even if you don’t think you’ll pay any tax.

Whether you’re a spreadsheet expert or your system is more ‘shoebox chic,’ (we’ve all been there), here’s what you’ll need to do before you sit down to file your return.

Register for your unique taxpayer reference (UTR) now! This is not a quick process as it can take ten days to arrive by post. An activation code for your account will arrive separately, also by post. If you do this too late and your reference numbers do not arrive in time, you will be late to file and may be fined, so don’t delay! Visit HMRC.

Get your figures in order. Your first return is likely to be quite simple. There are two main figures you’ll need to be clear on, your income and your expenditure. Your income is everything that you earned, and your expenditure is anything that you spent money on that is associated with your music work.

Evidence of your income could include:

• Invoices
• Payments made into your bank account (because not everything has an associated invoice)
• Records of cash payments
• Payslips or P60s if you have a PAYE job (more on those later)

Expenditure includes things like:

• Travel tickets
• Sheet music
• Hire of rehearsal rooms etc.
• Instrument maintenance
• Mileage (work this out separately from the rest of your expenses, you’ll see why) 

This list isn’t exhaustive and you should seek further advice for anything you are unsure about – HMRC call it ‘allowable’ expenses, so it’s up to you to make sure the expenses you claim are ‘allowable.’ 

If you haven’t made a record of these figures already, download your bank statements and open your diary. It’s up to you what you do next, but the main thing is to move carefully and make your working clear, just in case you have to explain it to someone who wants to know how you arrived at your figures.

The digital method for people confident with spreadsheets: Download the statements as .csv files and open them in a spreadsheet program (Excel, Numbers, OpenOffice etc.). Delete any rows that contain transactions not associated with your business – you could even go so far as to search for key words such as ‘Tesco’ and ‘ASOS’ to help you. Since money in and money out are in two separate columns you could use a SUM function at the bottom of those columns to calculate a monthly figure for each.

The digital method for people less confident with spreadsheets: Download the statements as .csv files and open them in a spreadsheet program (Excel, Numbers, OpenOffice etc.). Delete any rows that contain transactions not associated with your business. Download a basic bookkeeping template and then copy-paste your income and expenditure into that. Make sure to do this carefully. You should get the same result as above, but you didn’t have to write the formulae yourself.

The analogue method: Print your statements out and get your highlighters. Highlight all of your self-employed income in one colour, and all your business expenses in another. If the source of income is unclear, for example only shows an invoice or reference number, use your diary to check what it was for and annotate the statement to show exactly where the money came from. Add the numbers to get one figure for expenses and another for income. This method has the most room for error and should be handled with care. 

Calculating mileage expenses:

If you run a car, this is the way to calculate travel expenses. Don’t claim for petrol, it’s the wrong way to do it and you will be massively underclaiming your expenses. Perhaps you already made a record of your mileage when you did it. If that’s you, gold star, you’re ahead of the game! If you didn’t, don’t worry. So long as you have a record of where you went when (e.g. your diary) you can work it out now even if it is a bit time consuming. Google Maps is your friend. If you use the desktop version, you can click and drag to measure the mileage of the exact route you took to and from work. Make sure to save your working as you do the maths here – like before, it’s good to be able to show where you got your figures from if asked. Let’s imagine a scenario where you can’t quite remember where you went one day (did you ever just put ‘gig’ in your diary with no further details? Guilty as charged!). Depending on your privacy settings, sometimes Google saves your location data – visit Google timeline to check, even if you're creeped out by the idea and want to switch it off!

Once you have your mileage, it’s easy to calculate your expenses. The first 10000 miles are calculated at 45p per mile, then any further miles at 25p per mile. For example, if you drove 11000 business miles, then 10000 x 0.45 = £4500 and 1000 x 0.25 is 125, so your total claim would be £4750.

If your car is new, you might choose to declare it as a business asset and claim its depreciation, instead of claiming mileage. If this is something you are interested in you should seek further advice here: HMRC.

Got a PAYE job? You need to tell HMRC how much you earned in this job, so that you don’t end up getting taxed twice. This is probably the simplest part of the process, so long as you know where your P60 is. The P60 shows your earnings from last financial year along with how much tax you have already paid. Often this feels like the only number you get to input that you didn’t sweat over calculating yourself! If you can’t find your P60, contact your employer to issue you with a duplicate – by law they should have your last three years’ P60 certificates on file.

Main takeaways:

• If you do not have a UTR, get one now. Don’t put it off!
• Condense all your transactions into a figure for income and one for expenditure.
• Calculate your mileage if you run a car
• Don’t forget to account for PAYE income
• Whatever you do, show your working and save it somewhere safe. If it’s on paper you may want to scan it and save to your computer too.

For further information about tax returns and budgeting, watch Joshua Owen Mills's video. In the meantime, why not check out his blog about budgeting?

Explore all our finance and funding tips on the 21st Century Musician Toolkit.

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