Mastering Taxes as a UK Creative: Essential Tips for Artists and Side Hustlers

Whether you’re a photographer capturing life through your lens, an Etsy seller sharing handmade creations, or a digital marketer balancing freelance gigs alongside a full-time role, managing your taxes can feel overwhelming.

Part-time creatives and freelancers contribute significantly to the UK economy, fuelling innovation, inspiration, and even growth in local communities. But balancing creativity with the demands of paperwork, tax rules, and HMRC deadlines? That’s another story.

This guide is here to demystify the tax process for part-time creatives in the UK. Along the way, we’ll cover actionable tips to help you stay informed and financially prepared—so you can focus more on your craft and less on tax stress.

Do You Need to Pay Tax on Your Creative Income?

One of the first questions part-time creatives often ask is whether they need to pay tax. The answer depends on your total taxable income.

Understanding the UK Personal Allowance

For the 2024/25 tax year, most individuals in the UK have a personal allowance of £12,570. This means if your employment income combined with your freelance or creative income is less than this amount, you won’t owe income tax.

The Trading Allowance

If your income from side gigs (e.g., selling jewellery, photography services, or writing) is less than £1,000 a year, you can take advantage of the trading allowance. This is a tax-free amount, meaning you won’t need to report it to HMRC unless your earnings exceed this figure.

Tip: Keep track of all income, even if it’s under the threshold. Staying organised will prevent surprises and make it easier if your income grows over time.

Learn more about the trading allowance on HMRC’s official site.

Registering with HMRC

If your freelance or creative income exceeds £1,000, or your total income surpasses the personal allowance, it’s time to register with HMRC as self-employed.

When to Register

You’ll need to register by 5 October following the end of the tax year in which you earned your first self-employed income.

How to Register for a UTR Number

1. Visit the HMRC self-assessment page.
2. Fill out the online registration form with all the required information, including your personal details and the nature of your business activities. Make sure to double-check your entries for accuracy to avoid delays.
3. Once your registration is processed, HMRC will issue you a Unique Taxpayer Reference (UTR) number. This 10-digit number is essential for filing your tax returns and managing your tax obligations, so be sure to keep it safe for future use.

Example: Emma, a graphic designer, secured her first freelance client last year. She registered before the October deadline to avoid penalties and has kept her freelance and employment income separate for easier tracking.

Understanding Allowable Expenses

Did you know that several of your creative-related costs are tax-deductible? By claiming “allowable expenses,” you can reduce your taxable income and save money.

What Counts as Allowable Expenses for Creatives?

• Home Office Costs: A portion of your rent, electricity, internet, and even heating costs if you work from home.
• Tools and Supplies: Paintbrushes, camera gear, software like Adobe Creative Cloud, or knitting materials.
• Travel Costs: Journeys to gigs, exhibitions, or client meetings via car, public transport, or flights.
• Marketing: Expenses such as website hosting, business cards, and social media ads.
• Professional Development: Costs of courses, workshops, or training related to your work.

Warning: Keep receipts and proper documentation of all expenses to ensure compliance and avoid problems if HMRC has questions.

Setting Money Aside for Taxes

One of the biggest mistakes part-time creatives make is not preparing for their tax bill. To avoid scrambling at the last minute, follow this simple rule of thumb.

1. Set aside 20-30% of your freelance income each month.
2. Open a dedicated savings account for taxes to keep funds separate.

What Are Payments on Account?

Once you owe at least £1,000 in tax, HMRC will likely ask for “payments on account.” This means paying towards next year’s tax bill in advance, twice a year (31 January and 31 July). Be sure to budget for this!

Example: Tina, a ceramic artist, sets aside 25% of her monthly freelance income into a savings account. This habit ensures she’s always ready for her tax obligations.

Find out more about payments on account here.

VAT Considerations for Part-Time Creatives

For most part-time creatives, VAT registration isn’t required unless your annual turnover exceeds £90,000 (the current VAT threshold). However, voluntary registration can benefit those working with VAT-registered clients who require VAT invoices.

Should You Register?

• Required: If your income exceeds £90,000 annually, you are legally obligated to register for VAT to comply with government regulations. This ensures proper tax reporting and payment.
• Optional but Beneficial: If you work with larger companies that can reclaim VAT, registering could be advantageous. It allows you to appear more professional while enabling your clients to benefit from VAT deductions.

Example: Freddie, a part-time digital marketer, decided to voluntarily register for VAT to enhance his business opportunities. This decision allowed him to work more effectively with large organisations that require detailed VAT invoices for their records. By registering, Freddie not only met the expectations of his clients but also positioned himself as a more professional and reliable partner, opening doors to larger, more lucrative contracts.

National Insurance Contributions (NICs)

Self-employed individuals should also consider National Insurance Contributions (NICs), which are split into two key types for tax purposes.

Class 2 NICs

• Paid if your profits exceed £12,570, which is the current personal allowance threshold for income tax. This means you will only start paying once your earnings are above this limit, ensuring that those with lower incomes are not affected.
• Contributes to your state pension eligibility, helping you build up enough qualifying years to secure access to important benefits like the state pension and other welfare support in the future.

Class 4 NICs

• Based on profits exceeding a certain threshold and charged as a percentage of your income.

Example: Sarah, a part-time illustrator who works on freelance projects, regularly reviews and updates her National Insurance Contributions (NICs). By doing this, she ensures her benefits and state pension rights are protected, giving her peace of mind for the future. Sarah knows that staying on top of her NICs is crucial for maintaining financial security later in life.

Record-Keeping Made Simple

Efficient record-keeping is essential for meeting HMRC requirements and making tax time stress-free.

What to Keep

• Receipts for goods and services.
• Bank statements showing freelance income.
• Contracts and invoices issued.

Tools to Stay Organised

• QuickBooks or Xero - for managing income and expenses effectively, helping you keep track of your finances and make better budgeting decisions.
• FreeAgent - for organizing and managing receipts, tracking expenses, and generating detailed tax reports with ease.

Seeking Professional Advice

Managing taxes alongside your creative work can be tiring and complex. That’s where professional help can make a difference.

Why Work with an Accountant?

• Ensure full compliance with all HMRC regulations to avoid costly penalties and remain in good standing with your tax obligations. Our team will keep you updated on any changes to regulations, so you never miss an important deadline.
• Access expert advice on maximising deductions, exploring tax relief options, and uncovering new opportunities to save money on your taxes. With a clear strategy, you can keep more of what you earn.
• Save time and reduce stress by entrusting professionals to handle the complexities of tax management for you. From filing returns to addressing queries, we take care of it all, so you can focus on growing your business.

Example: Carla, a muralist, hired an accountant last year. Not only did she avoid over-claiming expenses, but her accountant also identified new deductions she hadn’t considered, saving her hundreds of pounds.

Speak with Virtue Accountants about your tax needs today.

Avoiding Common Pitfalls

Stay on top of taxes by avoiding these common mistakes:

1. Missing Deadlines: Always file your self-assessment by 31 January.
2. Mixing Finances: Keep personal and business expenses separate with a dedicated bank account.
3. Over-Claiming: Only claim expenses strictly related to your creative work.

Example: Jack, a painter, missed his January deadline for completing a major project. The result? A £100 penalty fee that cut into his earnings and could’ve been avoided. If Jack had set calendar reminders or used a simple project management app to stay on track, he might have delivered the work on time and avoided the extra cost.

Take Control of Your Tax Journey

Taxes don’t have to be a constant headache. By understanding your obligations, tracking your earnings and expenses, and seeking advice when needed, you can save money, avoid penalties, and set a strong financial foundation for your creative work.

And remember, you don’t have to tackle taxes alone. Virtue Accountants specialises in supporting part-time creatives and can help you make sense of self-assessments, expenses, and more.

Contact us today for a free consultation with Virtue Accountants!