Growth Guru

More Than Music: Why Every Artist Is a Business

Picture this: you've just wrapped a sold-out show, your new track is climbing the streaming charts, and your merch is flying off the digital shelves. Then reality hits with invoices, receipts, and a Self Assessment deadline staring you down.

Here's something most artists don't realise until it's too late: over 70 per cent of UK musicians earn some self-employed income, and roughly 307,500 people work in artistic, literary and media occupations as self-employed professionals across the country. Whether you're juggling gigs, streaming royalties, merchandise sales, or teaching sessions, every pound you earn is taxable. And here's the kicker: about half of self-employed music artists may be overpaying on taxes simply because they're not claiming all their allowable business expenses.

This article cuts through the confusion and simplifies the tax side of your creative career. You'll understand your responsibilities, choose the right business structure, and stay ahead of upcoming reforms without losing your mind or your money. Let's get your financial performance as tight as your setlist.

How UK Artists Are Taxed: The Core Components

Breaking down your tax obligations doesn't need to feel like deciphering a recording contract. Here's what matters for musicians, producers, and performers operating in the UK.

Income Tax via Self-Assessment

If you're earning from freelance gigs, streaming, sync deals, or merchandise, you're paying Income Tax through Self-Assessment. The tax-free personal allowance for 2024-25 sits at £12,570. Above that, you'll pay 20 per cent on income up to £50,270, then 40 per cent on earnings between £50,270 and £125,140, with a 45 per cent rate kicking in beyond that.

Here's a practical example: a painter making £25,000 after expenses pays no tax on the first £12,570, then 20 per cent on the remaining £12,430, coming out to roughly £2,486 in tax. The same logic applies to musicians.

The secret weapon? Meticulous record-keeping for deductible expenses. Studio hire, travel to gigs, equipment, online promotion, music subscriptions, and even that home office corner where you produce tracks can all count as business expenses. Yet surveys show that 81 per cent of artists paid for music subscriptions but 61 per cent didn't record them as deductions. That's money left on the table.

National Insurance Contributions

For the self-employed in 2024-25, you're dealing with two types of NICs. Class 2 is a flat weekly rate of around £3.45 if your profits exceed the Small Profits Threshold of roughly £6,515. Class 4 hits at 9 per cent on profits between £12,570 and £50,270, then drops to 2 per cent above that.

A key 2024 reform eliminated mandatory Class 2 for many self-employed individuals, simplifying the system and saving most people a bit of cash. But if your income fluctuates or stays low, you might want to pay Class 2 voluntarily to protect your State Pension entitlement.

VAT: When Your Turnover Hits the Big Time

The VAT registration threshold for 2024-25 stands at £90,000 of taxable supplies. For artists, that includes sales of original artwork, commissions, digital art, NFTs, workshop income, and teaching fees. If you're touring internationally or selling merch across borders, VAT gets even more complex with cross-border rules coming into play.

The Digital Advantage

Keep everything digital from day one. Even basic income apps or AI-powered bookkeeping tools like Coconut or QuickBooks Self-Employed simplify tracking and ensure you're not scrambling come January. Many artists still treat their creative work as a hobby rather than a business, which is exactly why they miss deductions and overpay.

Choosing Your Stage: The Right Structure for Your Career

Your business structure isn't just paperwork. It affects how much tax you pay, how much admin you face, and how professional you appear to labels, sponsors, or grant bodies.

Sole Trader: The Indie Artist Model

This is where most artists start, and for good reason. It's simple to set up, requires minimal admin, and all your profits are taxed under your personal name through Self-Assessment. Best suited for emerging artists, part-time creatives, or anyone testing the waters of professional music.

The downside? You're personally liable for business debts, and once your income climbs, the tax efficiency drops compared to other structures.

Limited Company: The Professional Enterprise

When your annual income consistently exceeds £40,000 to £50,000, a limited company often makes financial sense. You create a separate legal entity, which builds credibility with industry partners and potentially saves tax through a salary-and-dividends mix. You'll also limit personal liability if things go sideways.

The trade-off is more admin, annual filings, and accounting costs. But for established artists with multiple income streams, merchandise operations, or international touring, it's usually worth it.

Partnership: The Band Setup

If you're splitting income with bandmates, you might register as a partnership. Each partner reports their share of profits on their personal Self Assessment. It's straightforward for bands with equal splits but can get messy when contributions or earnings aren't balanced.

Verdict: Start simple as a sole trader, then evolve as your income grows. Once you're consistently hitting £40,000-plus annually, get a professional review to see if a limited company makes sense.

The Changing Tune: Tax Reforms Every Artist Should Know

Tax rules aren't static, and 2025 brings significant changes that'll affect how you manage your finances.

Making Tax Digital (MTD)

From April 2026, if your qualifying income exceeds £50,000, you'll be required to keep digital records and submit quarterly updates through HMRC-approved software. That's roughly 864,000 individuals in the first wave. The threshold drops to £30,000 in April 2027, then to £20,000 in April 2028.

Translation? If you're earning anything decent from your art, digital compliance is coming. Start testing a digital platform now. HMRC found that when MTD rolled out for VAT, about 69 per cent of businesses reported at least one benefit, and many said it reduced mistakes.

Basis-Period Reform

All self-employed profits must now align with the tax year running 6 April to 5 April. If your accounting period previously didn't match this, you may have faced a one-off larger tax bill in the transitional 2024-25 year due to overlap profit inclusion. It's a short-term headache for long-term simplification.

Emerging Trends

HMRC is pushing hard toward digitalisation with open-banking integration, real-time data exchange, and stricter enforcement for non-compliance. There's even talk of digital deduction tracking for streaming platforms, which could automate some income reporting in future years. From April 2025, penalties for late filing and payments under MTD systems could hit 3 per cent to 10 per cent of outstanding tax, so staying on top of deadlines matters more than ever.

When to Call the Manager: Why Specialist Tax Help Matters

About 70 per cent of creative professionals in surveys admit they lack sufficient business skills around accounting, tax, and contracts. That's not a failing, it's just reality when your training focused on your craft, not HMRC compliance.

Tax rules for creatives are genuinely nuanced. Your income might flow from live work, PRS royalties, brand partnerships, Patreon supporters, NFT drops, or sync licensing deals. Each stream has different tax implications.

Situations where specialist advice becomes non-negotiable:

• You're earning from both UK and international sources
  
  
• Your band's income splits are unclear or changing
  
  
• You're unsure which expenses qualify as deductions
  
  
• You expect to hit VAT or MTD thresholds soon
  
  
• You're considering switching from sole trader to limited company
  

Surveys show only about 30 per cent of music artists use an accountant, and roughly 25 per cent use accounting apps. The rest are flying blind, exposed to errors, overpayments, and potential penalties. For artists dealing with multiple income streams, international touring, or complex copyright and licensing arrangements, generic tax advice often misses the mark. You need someone who understands the creative industries.

Professional mtd self-employed services can review your situation, optimise your structure, and catch issues before they become expensive problems.

Take Control of Your Financial Performance

Your art is your business, whether you're a bedroom producer or a touring musician. The UK's creative industries contribute around £126 billion annually to the economy, which means artists and creative professionals are serious economic actors who deserve business-level financial planning.

Managing tax efficiently isn't about gaming the system. It's about protecting your creative freedom, keeping more of what you earn, and avoiding nasty surprises from HMRC. Understanding your business structure and planning ahead prevents the stress of last-minute scrambles or penalty notices.

The digital shift is here, real-time reporting is expanding, and penalties are getting stricter. But here's the good news: with the right setup and professional support, you can navigate all of this without losing sleep or creative momentum.

For confidential advice tailored to the music and entertainment sector, contact Audit Consulting Group. They specialise in self-assessment, company setup, digital accounting, and tax planning specifically for artists. Visit their website to book a consultation and let professionals handle your declarations while you focus on your next show, your next release, or your next creative breakthrough.

The stage is yours. Make sure your finances are ready to support the performance.