Self-Employment & Professionalism | Luke Toms
1) DEFINE FREELANCE/SELF-EMPLOYED WORK
Freelance work is when someone is self employed and sells their services by the day, hour or by job rather than having a fixed employer and a fixed salary. This also means your tax is not already deducted before you get your months pay therefore, you have to organize paying you own taxes, keeping strict records on what you have spent and how much you earn. When in freelance work you need to stay professional as this will increase your work load and will impress clients and will increase the chances of them hiring your services again or over someone else with the same skill.
Freelance work is when someone is self employed and sells their services by the day, hour or by job rather than having a fixed employer and a fixed salary. This also means your tax is not already deducted before you get your months pay therefore, you have to organize paying you own taxes, keeping strict records on what you have spent and how much you earn. When in freelance work you need to stay professional as this will increase your work load and will impress clients and will increase the chances of them hiring your services again or over someone else with the same skill.
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I) DEFINE SPECIFIC INCOME
Freelance video editing for companies that need their footage edited down into a nice watchable video. I currently am in this line of work and I am paid per job rather than a fixed rate. I choose how long I work for and the number of jobs that I take on.
I) DEFINE SPECIFIC INCOME
Freelance video editing for companies that need their footage edited down into a nice watchable video. I currently am in this line of work and I am paid per job rather than a fixed rate. I choose how long I work for and the number of jobs that I take on.
II) Another way I could make money through freelance is hiring my services as a musician doing session work. I could be paid per day or number of hours in the studio. Sometimes you will be asked to be signed off the rights for the track as all musicians playing on a track are entitled to a cut of the sales although in most cases this is usually a very small amount and session musicians tend to be bought off the rights, so they have a one off amount from the record label but are no longer entitled to a cut of the sales profit. The artist or producer, whoever is in charge of paying the session musicians would want to pay me through the books as they could put it through expenses and make it tax deductible but I would prefer to be paid in cash so that I don't have tax deducted on that money. In these situations people would come to a mutual agreement, usually 50/50.
III) Driving for bands. This is a great way you could hire your services out and make good money. All you need is a drivers licence and a good sense of humour to get you through the long days with same 5 people through a national or international tour. The band will usually supply the van or tour bus and its own costs but paying for a driver is a vital investment. Charging £350 per day for driving the band around on tour would be a good income but you could also combine it with controlling the live sound which you could then charge another £350 per day and have two or maybe three jobs if you could manage it all. Any expenses would normally be paid for but anything that comes out of your own wallet could be put through as tax deductible to the degree that it was used for work.
IV) Busking is a good way of making money and distributing your music to new people. As well as this you also are paid by cash. Although you should pay tax on this money, people don't bother depending on the amount because as it's cash they keep the tax. It is illegal if you do not declare the money you have made. If busking or any kind of work where cash in hand is the norm it's right to put it into your bank but the tax man will ask about a regular income and they will question it and try to get tax paid on it. For this reason people tend to keep cash in hand payments in cash to prevent this from happening.
III) Driving for bands. This is a great way you could hire your services out and make good money. All you need is a drivers licence and a good sense of humour to get you through the long days with same 5 people through a national or international tour. The band will usually supply the van or tour bus and its own costs but paying for a driver is a vital investment. Charging £350 per day for driving the band around on tour would be a good income but you could also combine it with controlling the live sound which you could then charge another £350 per day and have two or maybe three jobs if you could manage it all. Any expenses would normally be paid for but anything that comes out of your own wallet could be put through as tax deductible to the degree that it was used for work.
IV) Busking is a good way of making money and distributing your music to new people. As well as this you also are paid by cash. Although you should pay tax on this money, people don't bother depending on the amount because as it's cash they keep the tax. It is illegal if you do not declare the money you have made. If busking or any kind of work where cash in hand is the norm it's right to put it into your bank but the tax man will ask about a regular income and they will question it and try to get tax paid on it. For this reason people tend to keep cash in hand payments in cash to prevent this from happening.
V) Payment through a contract usually happens when involved with record companies and depending on the contract they will be paying you a certain amount of money over a set amount of years. If the record deal were to pay you £300,000 for a 5 year deal and you were to tell the tax people you were paid £300,000 you would be taxed at the over £150,000 bracket which is 45% on any money over £150,000. Whereas, if you told the tax man that you were paid £60,000 per year for the next five years you would be taxed at the lower rate of 40% on anything above £32,010 spreading the income of the contract over 5 years lowering the amount paid to the government. This way you pay less money to tax overall. For these kinds of financial situations it is advisable to get an accountant as they will make important decisions like these and help you pay the right amount of tax. Some accountants are not very reliable and can lose you money. Having an accountant is also tax deductible as they are part of your cost as a freelance worker.
VI) Royalties are another form of income. If you have played or written any of an album or record of any sort you will be entitled to royalties. This is a small amount of money that you make every time your music is played. These payments will usually be small but depending on the size of your track the money could be little but often. Session musicians who have played on records are entitled to a small payment too. These days the session musicians you usually bought off the royalties contract by the record company so they have a one off payment then they will not be on the royalties on that record. Considerations to make would be whether the record is any good. if it's not very good and you don't think it will be a hit it might be worth signing off the royalties but if you think that it might go down well then you could keep your royalties entitlement and hopefully make a few pennies over the years.
3) ASSESS INCOME TAX CONSIDERATION
Income tax is a payment that everyone pay whether you are employed or freelance. If you are employed the money will already be taken away from before you get your pay slip. On the other hand if you are self employed you are required to do you own tax return each year. For this reason it means you need to be professional and organised otherwise you could end up paying to much money to the government or too little each would be as bad as each other. If you are thought out to be suspicious in any way the tax company will ask for things like recipes, invoices or any kind of proof of purchase. This can get very confusing as you only do this once a year, it's good to keep recipes for anything you buy. Having an accountant is very useful although you have to pay an accountant but they are tax deductible. Due to the fact that your tax return is all down to you as a freelance worker it's important that you are professional at all times, it could result in paying to much money otherwise.
4) GIVE AN EXAMPLE OF AN INVOICE
An invoice is a receipt for both participants in a business deal. it is also a request for money on a job. When in freelance work you will come across an invoice very frequently. You will usually have to write one yourself but may find time when other people will be handing you one. An invoice is a record or receipt of your work. It would normally contain the following features.
1. Your name or company and address.
2. Your employers address and name or company name.
3. Your bank details.
4. Your Nation Insurance number.
5. Number of hours worked or any unit measure the quantity of work you have done e.g. hours, days, projects. All totals should be shown. An invoice number.
6. A date for the work you did.
7. Where the work was carried out.
7. Where the work was carried out.
If all these things are included the people who have hired your services will have a clean record of what work you've done and they know what they have spent money on and can put through some cost as tax deductible.
The nicer your invoice is presented the higher the chance the employee will hire you again and use your professional services again. Having a nicely presented invoice shows them what they are getting is worth the money they are paying and shows that you can be professional outside of your particular service that you have supplied. Also punctuality is key for an invoice. There is no good in sending your invoice 3 months after you've done the work as they will by pay you because you have left it too long. When sending an invoice write and send it immediately after you have done the work. Creating templates are a good way of speeding the process and producing them quickly enough for your clients.
This example of an invoice shows clearly all the features that a good invoice needs.
This is not my picture. Taken from Google images.
5) GIVE AN EXPLANATION OF TAX DEDUCTIBLE EXPENSES
Tax deductible expenses are costs that you have paid out for that were fully or partly work related costs. When in freelance you find your own work this could mean you get a lot of different types of jobs all in the same field. Money does get spent of travel, repairs and cost of stock. All these things are tax deductible. This means that particular cost like the ones stated are eligible for purchase without being taxed on them. This is done through your annual income. At the end of each tax year you can calculate the amount of money you have spent on work related items and this is the taken away from your total earnings making the total amount you pay to tax lower as you total income has been reduced.
This is good as you can save money because of work related costs. The down side is you have to spend that money in the first place to get the money off so don't go spending thousands of pounds on something you don't really need. It's not free money. A good way to separate spending for work and private purchases would be to have two band card or separate money for each. With two card to can keep all your transactions clean and separate from each other. The resin this is so important is because business related purchases are allowed and private purchases are not. At the end of the tax year you can give the tax man you bank transaction for the year and this would be a very valid source of proof of purchase that the tax man would ask for. This is also a professional and organised way or handling your money which looks good to the tax man.
6) CALCULATE SELF-EMPLOYED NATIONAL INSURANCE
National insurance is £2.70 per week. If you earn below £5,725 you don't have to pay, with some exceptions.
Total Annual Earnings £57,800
National insurance is £2.70 per week. If you earn below £5,725 you don't have to pay, with some exceptions.
Total Annual Earnings £57,800
Amount Tax deductible £8,570
Amount earned after tax deductibles £49,230
£32,010.00 -
£9,440.00
£22,570.00 - Tax 20%
£22,570.00 * 0.2 = £4,514 (Tax)
£49,230.00 -
£32,011.00
= £17,219 - Tax 40%
£17,219.00 * 0.4 = £6,887.60 (Tax)
£4,514.00 +
£6,887.60
Total Tax = £11, 401.60
£49,230.00 -
£11, 401.60
Total Profit £37,828.40
____________________________
WITH-OUT TAX DEDUCTIBLE
Total Annual Earnings £57,800.00
£32,010.00 -
£9,440.00
£22,570.00 - Tax 20%
£22,570.00 * 0.2 = £4,514.00 (Tax)
£57,800.00 -
£32,010.00
= £25,790.00 - Tax 40%
£25,790.00 * 0.4 = £10,316.00 (Tax)
£4,514.00 + £10,316.00
Total Tax = £14,830.00
£57,800.00 -
£14,830.00
Total Profit £42,970.00
Allowance
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2013 to 2014 tax year
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Born after 5 April 1948 - Personal Allowance
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£9,440
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Rate
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2012 to 2013 tax year
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2013 to 2014 tax year
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Basic rate 20%
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£0 to £34,370
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£0 to £32,010
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Higher rate 40%
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£34,371 to £150,000
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£32,011 to £150,000
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Additional rate 50% (45% from 6 April 2013)
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Over £150,000
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Over £150,000
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7) COMMENT ON POTENTIAL PITFALLS AND LIFESTYLE CHOICES REGARDING ALL OF THE ABOVE
When working as a self-employed worker it's important that you are professional. When you are in self-employment work it is important that you present yourself as professionally as possible. Providing promotion such as business cards and a website are basic forms of promotion but in the modern day social media is the new way of getting fans, customers and advertising your services. Although its hard work keeping a Facebook page, a Twitter account and maybe a MySpace page but in the present time with social media taking over these are the ways you will have to pursue to be successful as a freelance worker. When going to job interviews, meeting managers or any other person in the music industry it's important that you give a really good impression of yourself as a hard working successful and professional person.
By increasing your skills and to a more professional level and building new skills people are going to want to hire you for more than one service. If you can control live sound on a tour, drive the band around as well. If you can manage band and artists manage two band. The more you increase your skill the wider amount of people you open your service too and you will make more money.
When building contacts and finding work within the the music industry it's important you show to people you are legitimate and reliable. Spontaneous favours such as driving gear, drumming on a record is all things I potentially could do as a favour. Generosity in the industry builds contacts and a good word under your name which will help you grow and prove to people you are a safe and trustworthy person. If I find people in my debt you may be able to come back to them later and claim a favour in exchange for you work earlier on. Being in exchange with everyone in the music industry is very important otherwise things get out of sync and some people are getting away without paying and others worse off. Being honest and respectful is so vital to getting to the top as unreliable and untrustworthy people will never want to be worked with and find themselves without work. Keeping you accounts clean and tidy is a professional way of working. Either dedicated a day each month to arrange payments and looking at all your finances within the month. you will be able to manage more work if you haven't got jobs that you haven't been paid for from 2 months ago still on your mind or people you are putting off paying because you are owed some money from someone else. Things get too confusing and you will find yourself in a muddle and out of pocket and looking like an unreliable piece of work.
When you finding work in the industry being professional such as handing invoices on time is really important, any time 2 weeks after a job is going to go out of the customer's head and they wont want to pay you. Handing it in immediately after will ensure you that you will be paid right away.
Another way of being professional is being contactable at all times, ready to take a job. I can achieve this by always having my phone on me having the means of organised events either on iCalender or a physical calendar at home. The good thing about iCalender is available on your phone which is synced with you computer so it is accessible where ever you are. This means you can take a job in the street, at home, on the tube, anywhere. Although once you start taking a few jobs each week would will reach clashes and sometimes you may fall sick. It's important to have someone who you could recommend or have a replacement ready that can stand in. This really puts your professionalism to the test as it shows you are able to think on your feet and still organise jobs that you are unable to do yourself. Having a dedicated Email account is defiantly a good way of keeping work Emails separate from private. This can also be applied when spending money. Every time you make an amount of money from any kind of work, DJing, live sound, session work putting away 20% is a great way to keep books clear. at the end of each tax year you will have your tax amount owed already put aside and you could find yourself with money spare which you could invest in new equipment or save it away.
Hedley Marks
By increasing your skills and to a more professional level and building new skills people are going to want to hire you for more than one service. If you can control live sound on a tour, drive the band around as well. If you can manage band and artists manage two band. The more you increase your skill the wider amount of people you open your service too and you will make more money.
When building contacts and finding work within the the music industry it's important you show to people you are legitimate and reliable. Spontaneous favours such as driving gear, drumming on a record is all things I potentially could do as a favour. Generosity in the industry builds contacts and a good word under your name which will help you grow and prove to people you are a safe and trustworthy person. If I find people in my debt you may be able to come back to them later and claim a favour in exchange for you work earlier on. Being in exchange with everyone in the music industry is very important otherwise things get out of sync and some people are getting away without paying and others worse off. Being honest and respectful is so vital to getting to the top as unreliable and untrustworthy people will never want to be worked with and find themselves without work. Keeping you accounts clean and tidy is a professional way of working. Either dedicated a day each month to arrange payments and looking at all your finances within the month. you will be able to manage more work if you haven't got jobs that you haven't been paid for from 2 months ago still on your mind or people you are putting off paying because you are owed some money from someone else. Things get too confusing and you will find yourself in a muddle and out of pocket and looking like an unreliable piece of work.
When you finding work in the industry being professional such as handing invoices on time is really important, any time 2 weeks after a job is going to go out of the customer's head and they wont want to pay you. Handing it in immediately after will ensure you that you will be paid right away.
Another way of being professional is being contactable at all times, ready to take a job. I can achieve this by always having my phone on me having the means of organised events either on iCalender or a physical calendar at home. The good thing about iCalender is available on your phone which is synced with you computer so it is accessible where ever you are. This means you can take a job in the street, at home, on the tube, anywhere. Although once you start taking a few jobs each week would will reach clashes and sometimes you may fall sick. It's important to have someone who you could recommend or have a replacement ready that can stand in. This really puts your professionalism to the test as it shows you are able to think on your feet and still organise jobs that you are unable to do yourself. Having a dedicated Email account is defiantly a good way of keeping work Emails separate from private. This can also be applied when spending money. Every time you make an amount of money from any kind of work, DJing, live sound, session work putting away 20% is a great way to keep books clear. at the end of each tax year you will have your tax amount owed already put aside and you could find yourself with money spare which you could invest in new equipment or save it away.
Hedley Marks
