Save Money: Actors’ Tax Returns and “Use of Home as Office”
Here at the home of tax for actors we’re turning our minds to the forthcoming busy Autumn of filings for 2019/20. This year more than ever, it’s important to make as many savings as you can – so bear in mind for starters that if you come to us for the first time to compile your return for you, you won’t pay us our £199 fee until the present tax deferment period ends.
However, whether we are compiling for you or whether you are going to paddle your own canoe, you should adopt the same approach to a problematic item – “Use of Home as Office”. This item is tax-speak for a line which will appear in the expenditure list for all creative freelancers.
Any freelancer who works from home can claim a proportion of the expenses of running their home – because they are using their home as an office.
You may think that an actor (or sportsperson, or cameraperson, or designer, etc etc) doesn’t do any/much work from home, but that’s not the case, and it isn’t HMRC’s view. When you are emailing engagers, or making your self-tapes, or organising your diary, or the 1001 other things that a freelancer has to do, you are working – and in all probability you are doing these things at home.
There is very carefully-worded guidance from HMRC about this. We advise you to pay very close attention to the wording – you are going to save money, 99 times out of 100, if you do.
Many clients have told me in the past that they use “a table which HMRC publish” to give a rate for this expense item. Some of even gone so far as to tell me that their understanding is that they are obliged to use it.
It is true that HMRC publish a table. It is also true that you can use it if you want. It is emphatically not true that you are obliged to use it; and if you don’t use it, but do a slightly more complex calculation yourself, you will almost certainly save money.
There are three main types of expense that your claim is based on: Rent, or interest on your mortgage if you are a homeowner (remember that it’s only the interest portion of your mortgage that’s the expense, not the whole repayment); Light, heat & water; and Council Tax.
[If you’re wondering about phone/IT/broadband, these days we treat those separately, because for many people in today’s world these items are much less tied to your physical dwelling. Also there will be some expenses in this category, like for example a subscription to Sky Arts or Netflix, that you can claim in total – so treat phone and internet charges completely separately from “Use of Home as Office”.]
So for the main three, HMRC offer you the use of their simplified table. “Simplified expenses,” they say helpfully, “are a way of calculating some of your business expenses using flat rates instead of working out your actual business costs”. You see? They’re not saying you have to use this method. They’re saying you can if you want. But if you do, you’ll probably pay for it.
OK, here comes the maths bit (sorry).
If you work at home more than 101 hours a month, and if you’re an actor you probably do, the simplified checker offers you an allowance of £26 per month - £312 for the year.
Now work it out the long way.
Add up your total annual rent or mortgage interest cost, your total gas and electricity bills, and your Council Tax. Let’s call that number X.
Work out the proportion of your space that you use for work. Remember storage space, and space you use for filming your self-tapes, setting out all your equipment etc. Most people will probably get to 10% or 15%.
Say you work at home on average for 3 days per week, which gets us over the 101 hours per month.
Multiply X by 10-15% x 3/7.
I bet you the answer is more than £312.
If the answer is (say) £1000, and you are therefore going to reduce your taxable profit by about £700 doing the full calc instead of the simplified method, then most people will have just saved 20% x £700 = £140 off your tax bill, all by doing a sum that will take you 10 minutes.
Do remember to keep a record of your calculation and be prepared to explain it if you should need to. This method isn’t an excuse to ignore the rules – on the contrary – you are playing by the rules better by doing this. I can’t emphasise this too much. I am not telling you to tax-dodge, or to do something cheeky which will contribute to crippling the NHS. I am encouraging you to do the fairest thing possible, to work hard and play by the rules, to do the utmost that is required of you to contribute to the totality of civil liberty that is underpinned by our taxation system.
Good luck, and remember 'Accounting for Actors' are always here to answer your questions, for free, by email (see below) or on Facebook or Instagram (@accounting4actors).
We are necessarily only making short and general points here – if you are in any doubt about your particular circumstances, call us for free advice on 08000 487626, message us on Instagram @accounting4actors or email email@example.com .
Please get in touch with us if you have any questions at all. We’ll chat to you about your affairs with no obligation on you whatsoever.
Please visit www.accounting4actors.co.uk and connect yourself to the leading actors’ accountants. Find out about tax accounting for actors, accounting for creative and cultural industry professionals, actors’ tax returns, and all accounting for creatives.