Please note: this is an informative guide for other models, so please skip it if uninterested, and I'll get back to the normal stuff next time! :-)
Ah, the dreaded tax return. I've been doing mine recently (while listening to Jill Scott, French/German lessons, Gwen Stefani. Zero7 & Robert Plant, so far...).
I'd been thinking of putting together a bit of a 'quick guide' for models who need help with this (as I'm sometimes asked about it by those who find this side of things baffling), detailing how I organise my day-to-day records, and how I then convert this into the spreadsheet used for my annual tax self-assessment. I had a few emails from models who said they'd like some guidance with this and thought I would just do a blog post. There's a lot of info though, so I'm going to split it up between posts, taking it step by step.
OK, firstly, the info here comes with two massive disclaimers:
1. I am NOT an expert. I started off using an accountant when I turned self-employed and also attended a 'how to become self employed' workshop, which was quite easily the most 'I'm actually going to die now' boring afternoon of my life, so I know a thing or two, but things do change every year, and there will definitely be things others know about that I don't. I highly recommend seeking advice from an accountant if you're unsure (and also just googling it or going via the HMRC's website; their advice is actually quite comprehensive). All I can say is that this is what I do and it works for me! At the very least it will hopefully start new models off in the right direction.
2. I live in the UK and so abide by UK laws. I've got no idea what happens in other countries when it comes to tax, sorry!
PART ONE of this mind-blowingly exciting (well, hopefully sort-of-useful) topic series is all about...
...Specifically, how to keep records that will later make submitting your self employed tax return a hell of a lot easier.
As a self-employed person, you are required to submit an annual 'self assessment'. It's not worth burying your head in the sand about this, as you can get in trouble if caught out, and it feels much nicer to know that, if investigated later down the line, you have nothing to hide. It's also not worth 'minimising' what you earn (and in an industry where many payments are made in cash, it would be easy to pretend you didn't receive that extra £300), as if/when you later come to apply for a mortgage (and are hit with the reality that it can be quite a lot more difficult for self employed people to get them), you'll realise that the higher the average figure on your tax returns that you state as your income, the higher the loan you will be eligible for (e.g. if a bank generally offers 5 X your income, that extra £300 will be 'worth' £1500 to you in a loan), so it's actually in your interest to be totally upfront about everything you earn anyway.
So, what do I have to do?
OK, throughout the whole palaver, it's worth bearing in mind that 'the taxman' is ultimately only interested in two figures:
1. the total amount you have earned during the tax year.
2. the total amount you have spent which is classed as a 'business expense'.
So what is a business expense?
In simple terms, a business expense is any incurred cost that is required for your business. For a model, this usually includes any relevant clothing you've bought for a shoot, make up, flights, hotel stays, portfolio-site subscriptions, website maintenance, food/meals bought on modelling trips and car costs (etc.). (Sadly for me, I can't claim my addiction to art-prints/postcards, inappropriate penchant for french clocks or ridiculous weekly hoarding of CDs as a business expense... but hey ho.)
If you work from home (e.g. on 'admin days' in between bookings and gallavants to Mexico/Iceland/Paris), you can also claim as an expense a portion of your lighting/rent/heating bills, because your home is acting as your office space. Your telephone bills are eligible too; to find out the exact portion you can claim as an expense (as a hefty portion will usually be for personal use), it's worth checking on hmrc or by asking an accountant, as these figures/rates do change from year to year. You could make this simpler by using a completely different phone for work (as it keeps your business and personal use clearly separate), but you don't have to.
How to keep day-to-day records and generally rule the world
Telling people you are self employed often inspires comments along the line of 'wow, you must spend a lot of time drinking tea' (true; tea is a fundamental part of my life) and 'it must be so amazing to be in control of your own schedule like that' (also very true), but most people also say something along the lines of 'You must have to be so organised, though. I just don't think I could be that disciplined.' Yes, being self employed (successfully) requires a head that is firmly screwed on, at least most of the time... Despite having what is sometimes (kindly) referred to as a 'whimsical nature', I am personally a very organised and disciplined person, and I always have been (I am the sort of person who loves stationery, writing lists and forward planning. It's very rock and roll.)
Seriously though, learning to be organised will not only help your own sanity but will also ensure you don't irritate and put off clients by forgetting things, turning up at the wrong time and with the wrong things, or generally going around looking stressed and confused.
Everyone has their own methods that will work for them, but here's what I do on a day-to-day level.
Everything starts with the page-per-day diary. (That's right, I use an old-fashioned paper one; no calendar apps for me, thank you very much. It's fine if you prefer the technological approach. I sometimes wish I could bring myself to switch over, as it's true that if I lost my diary my entire world would basically fall apart, since I write EVERYTHING in there, but having an online diary just holds no appeal for me beyond that whatsoever. Did I mention I like stationery?)
I need a whole (A6) page per day as.... well, I do quite a lot, and I need to write it all down. Don't ask me what I'm doing two days from now – I have absolutely no clue unless you give me a second to have a quick rifle through my beloved diary friend. (Seriously, I am the sort of person that has to write down 'go to bank', and 'check in online for flight', so I know I won't forget to do it and everything gets done in advance! Obviously I write down a ton of personal things as well, but won't mention them here. :-) )
(NB. In case it's not clear, my diary is not one of those 'Dear diary, today was very nice thanks. I went to the cinema, wore my new dress, made a nice curry and met a boy' situations; it's a to-do list on acid.)
Here's how I use it for bookings.
Say I'm booked on the 6th April for a photoshoot. I'll flick to that page in my diary and write down something along these lines:
** Possibly not his actual number.
(Oh, and I don't really charge £500 for 4 hours. :-))
(Oh, and I don't really charge £500 for 4 hours. :-))
This might look really messy to you (and I hope you can read it. Sometimes my handwriting is nice but mostly it's flamboyant in not-a-good way), but it tells me exactly what I'll need to know, and is roughly what I write for each booking (after doing this for 5 years you do get into habits!). A few things:
'p/s' for me means 'Photoshoot'. As you can see, as soon as the booking is confirmed, I've written the name of the photographer/artist and his/her contact details, the timings and agreed compensation of the shoot, the theme as it's been given to me (reminding myself to have another look at a moodboard, maybe the evening before, if one's been emailed to me), a 'pack list' where I've noted down anything the photographer has suggested or specifically mentioned for me to bring.
I've also looked up the route on googlemaps, worked out how long it will take me to get there, what time I need to leave my house, a rough idea of the route to start me off if sat nav plays up, and also the return mileage for the booking. The return mileage is important as you need to enter it into your spreadsheet for each booking for tax purposes and noting it down when you are already looking up the route on googlemaps anyway makes sense rather than having to do it later for each and every shoot!).
A note about car costs. There are two ways of keeping track of your car-related expenses and you have to choose one. You can either record your business-related mileage, which means you DON'T write down what you spend on petrol/car maintenance, or do it the other way around, and note down the exact petrol/maintenance costs that are related specifically to your business (this latter is called the 'actual' rate). It's up to you to guess which will get you the best deal for your car, bearing in mind the allowance of hmrc, but note that you can't switch methods until you change vehicle.
By the way, here's a quote from HMRC about using the mileage rate:
The mileage rate covers the costs of running and maintaining the vehicle, such as fuel, oil, servicing, repairs, insurance, vehicle excise duty and MOT. The rate also covers depreciation of the vehicle. The mileage rate does not cover costs that are specific to a particular journey such as tolls, congestion charges and parking fees. These will be allowable as a deduction where they are incurred solely for business purposes.
At the beginning of my diary, in the inside front cover, I also have a yearly view, which shows me 12 columns for Jan-Dec. I write in pencil all the numbers to represent incoming payments so that I can see at a glance how my bookings are looking, as well as marking out when I'm away from home, on a trip, or booked for non-business things. I find it's good to have a clear overview as well as seeing details within the diary's pages.
Oh, and at the bottom of the page in my diary, below the margin, I note down any CASH payments I've made that are business-related. In the imaginary example above, I've spent £5.83 on lunch and £2.40 on bus fare. I make a point of using my debit card for as many expenses as possible, as that makes putting my expenses into my spreadsheet (directly from my bank statement) easier at the end, but if I have to pay for something in cash, I always write it down and then whip through the bottom margin of my diary for those extra expenses later.
The day before the booking, I usually write down 'Plan tomorrow: pack groom route note alarm', and then individually tick off those words as I get organised. ('Pack' is self explanatory. 'Groom' kinda is as well. I check the route if I haven't already. I usually write a note to leave behind, so that other members of my household have a rough idea of my whereabouts, a contact number and when to expect me back. And I set my alarm.)
I hope this isn't far too basic, or that I've gone the other way and blasted you all with my organisation. It might seem a lot but this is all such second-nature to me that it takes just seconds. Hopefully anyone completely new to this stuff will find it helpful in some way. It's good to share tips!
Look out for the NEXT POST on this topic: How to convert your diary into the all important SPREADSHEET for submitting your self assessment.
P.S. Before we all collapse of verbosity of the most dull & dreary kind, here's a pretty picture, taken in France by Karen Jones. :-)