As an artist, your main focus is on creativity and bringing your vision to life. But whether you’re selling artwork, managing commissions, or running workshops, handling your finances properly is just as important. Unfortunately, many artists overlook the financial side of their business until it’s too late. Having solid accounting practices in place can help you stay on track, save money, and ensure that you’re complying with UK tax laws.
In this article, we’ll walk through the top 5 accounting tips every artist in the UK should know to help simplify your financial management and focus more on your craft.
1. Keep Track of Your Income and Expenses from Day One
The first rule of accounting for any business, including an art-based one, is to track your income and expenses accurately. Whether you’re working as a freelance artist or running your own studio, keeping track of every penny is vital for understanding your financial situation.
Why It’s Important:
Tracking income and expenses allows you to understand how much you’re earning and spending, which is essential for budgeting and tax filings. The UK tax authorities require you to report all sources of income, and failing to keep records could lead to penalties or missed deductions.
Pro Tip:
Use accounting software or a simple spreadsheet to log every sale, commission, and expense. Categorise your expenses (e.g., materials, travel costs, studio rent) to make it easier when you need to file taxes. Alternatively, hiring professional accounting services for artists can help streamline this process and ensure nothing is missed.
2. Separate Your Personal and Business Finances
As an artist, it can be tempting to mix personal and business expenses, especially if you’re just starting out. However, maintaining a clear distinction between the two is essential for accurate accounting and tax reporting.
Why It’s Important:
By separating personal and business finances, you’ll make it easier to track your business’s profitability, claim tax deductions, and avoid potential confusion during tax season. HMRC (Her Majesty’s Revenue and Customs) expects artists to keep a separate record of their business transactions.
Pro Tip:
Open a separate business bank account to handle all your sales, commissions, and art-related expenses. This will also make it easier to see how much you’re actually earning from your artwork versus personal expenses.
3. Understand Your Tax Obligations as an Artist
Many artists don’t realise that, as a sole trader or freelancer in the UK, they are required to pay taxes on their income. Whether it’s Income Tax, National Insurance Contributions (NICs), or VAT (Value Added Tax), understanding your tax obligations is crucial for avoiding fines and staying compliant with UK law.
Why It’s Important:
As a sole trader, you must file an annual Self-Assessment tax return with HMRC to report your income and expenses. You may also need to pay National Insurance and VAT, depending on your earnings. Without a clear understanding of these obligations, you could face penalties or underpay your taxes.
Pro Tip:
Consider working with a professional accountant who can help you calculate your tax liability, file your Self-Assessment returns, and ensure you claim all the appropriate tax allowances. Accounting services for sole traders can help you navigate this process with ease.
4. Take Advantage of Tax Deductions for Artists
Artists in the UK can claim a range of business-related expenses to reduce their taxable income. These allowable expenses can include anything that is necessary to run your business—materials, studio rent, marketing costs, and even home office expenses if you work from home.
Why It’s Important:
By claiming these expenses, you can reduce the amount of income that is subject to tax. For example, if you purchase paintbrushes, canvases, or digital tools necessary for your artwork, these costs are tax-deductible.
Pro Tip:
Make sure to keep receipts for all your business-related purchases, and track your mileage if you travel for work. An accountant can help you identify additional tax-saving opportunities and ensure you’re claiming every eligible expense.
5. Stay on Top of VAT If Your Income Exceeds the Threshold
If your taxable turnover exceeds the VAT registration threshold of £85,000, you must register for VAT with HMRC. Once registered, you’ll need to charge VAT on your sales and submit quarterly VAT returns to HMRC.
Why It’s Important:
Failing to register for VAT when required can lead to fines and penalties. On the other hand, being VAT registered can also benefit you by allowing you to reclaim VAT on business expenses. This can be particularly useful if you purchase expensive art materials or equipment.
Pro Tip:
If you’re approaching the £85,000 threshold, it’s a good idea to get in touch with a tax advisor to discuss whether VAT registration is the right move for your business. Even if you’re under the threshold, you can voluntarily register for VAT if it makes financial sense for you, especially if you work with other VAT-registered businesses.
Why Accounting Services for Artists Can Help You Focus on Your Craft
As an artist, your primary focus should be on creating, not spending hours on accounting tasks. Hiring accounting services for artists can save you time and ensure that your finances are handled professionally. Accountants who specialise in creative businesses understand the unique challenges that artists face and can help you streamline your financial processes, from bookkeeping and tax filings to VAT returns and financial planning.
At Lanop Business and Tax Advisors, we offer tailored accounting solutions for artists in the UK. Our expert accountants can help you manage your finances, stay compliant with tax laws, and make the most of your creative business.
Final Thoughts
Being an artist in the UK means balancing your creativity with the practicalities of running a business. By following these top 5 accounting tips, you’ll be in a much better position to manage your finances, save money on taxes, and avoid the stress of financial mismanagement. Whether you’re just starting out or looking to simplify your current process, good accounting practices will help you thrive in your artistic career.
Don’t let accounting overwhelm you seek professional help to make your art business as smooth as your creative process.