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Tanya Vital's Blog

Sunday, 20 November 2011

Money Matters


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I constantly urge serious Actors to join Equity. Any Actor who is entering into legal contract, signing dotted lines and receiving money SHOULD be a member of Equity. As many of you already know – because I shout it from the rooftops – Equity have been indispensible to me in the past. They have delivered me from the Devil himself. Without their legal backing and full knowledge of this dog eat dog industry I could have been a very sad and lonely person for a hell of a long time. They are well worth every penny.
Not only do they pack Legal clout, they provide a wealth of other perks and benefits for members. This week I attended a FREE course on Freelance Business Management and I cannot rate it enough! The course was called ‘Money Matters’ and was run by the FEU (The Federation of Entertainment Unions) http://www.feutraining.org/ .

The speaker (Stuart Worthington) managed to pack possibly a whole year’s worth of study into 6 hours. It would take me forever to try and reiterate everything he said but I will break it down as much as possible:

Aims & Objectives
As “Owner Managers” of our own business – be that ourselves as self employed performers or Theatre Companies we should decide what it is we want from our work and set specific and realistic milestones/objectives to meet. Stuart Worthington said it takes 5 years to stabilise (stabilise debt, put methods into motion) and 10 years to become successful (be free from debt and enjoying the fruits of your labour). Stuart seemed like a pretty switched on guy so who am I to disagree. His teaching method used his own personal experiences of self employment and he said things I’d heard before from reading The Secret (without being all “New Age”) and other Personal Development writers such as Steve Pavlina.


Budgeting/Cash Flow
This next part was harder for me personally to swallow. I don’t CARE about overheads and costs, I’m a Creative God damn it! Don’t we have people to deal with this for us? But my ignorant train of thought was soon left reeling after Stuart and a few other class members spoke of being left holding the ‘baby’ after leaving it all up to incompetent/negligent Accountants. Apparently, according to the Court, they don’t care if you paid someone to do your accounts/Tax. If they did it wrong or failed to do it at all, THE BUCK STOPS WITH YOU! And seen as I Self Assess my Tax every year I better get a damn handle on this money stuff and FAST!

He said there 2 types of self employed people. Exhibit A) The happy go lucky type(numpty) who goes from job to job, barely having a handle on their own finances, just living life as it comes. This would be me!

Exhibit B) The one who budgets and forecasts and knows which are good months and which are bad months. Who has a complete understanding of what is coming in and going out and can PREPARE for things in the future. This is what I want to be!

So here comes the maths (dread – but stay with me) We must budget and document everything that comes in, goes out and when. Do this monthly, 3 monthly and annually including your Gross and Net profit (If you don’t understand this see the useful links I’ve added at the bottom). What does each month cost? Have you broken even?  How much do you need to make in the next 6 months? Budgeting and looking at cash flow should allow us to both forecast for future months alongside the actual figures. Which areas are contributing and which are taking away? Where am I wasting money? There are iPhone/iPad/computer apps that can make all this very easy for us

Tax
This was my FAVOURITE bit #sarcasm.

Being a law abiding self employed person I file my Tax return every year (with help). I never understand it 100% but I have all my receipts collected over the year in a file under their various headings ready to be assessed and added to my allowable expenses – or not. I hand over my money and forget the whole nightmare until the following year. This I’ve learned is to be my downfall. We should embrace the tax return or at least get to understand it enough to see what we are entitled to or not.

With advice from Equity and the HMRC there are a whole host of things I could be claiming for that I never knew about, particularly vehicle allowable expenses (Not fuel or mileage).
Not only did it cover allowable expenses and such, but he explained our position when it comes to Tax and employers. Apparently we are SELF EMPLOYED when it comes to Tax but we are EMPLOYED when it comes to National Insurance (on Equity contracts). In Layman’s terms we deal with our own Tax but whoever employs us deals with our National Insurance. Equity are supposedly fighting this out in Court at the moment so keep your eye on this.

One very important issue came up and that was Tax when working abroad. I never knew this but depending on what foreign country you work in, you could be paying Tax both at the HMRC AND in that specific country. This is called Withholding Tax. He advised to investigate at the HMRC or F.E.U (Foreign Entertainment Unit of HMRC) whether that particular country is subject to or not and get a Withholding Tax Certificate at least 3 months before you travel. This allows Withholding Tax to be reclaimed.

National Insurance
This whole ridiculous debacle was cleared up for me once and for all. Again Actors we are SELF EMPLOYED when it comes to Tax but we are EMPLOYED when it comes to National Insurance (on Equity contracts).

The National Insurance classes were explained to me:

·         Class 1: Employee

·         Class 2: Self Employed (£5,135-£7,225 pa – this may change)

·         Class 3: Voluntary (Don’t have to pay N.I but still want benefits of e.g. Future State Pension – yes we can laugh later at that 1).

·         Class 4: Self Employed (£7,225.01-£42,475 etc)
We should not be paying Class 1, 2 and 4. Check which is relevant to you and TICK THE BOX ON THE SELF ASSESSMENT FORM THAT ALLOWS YOU TO ADJUST YOUR NATIONAL INSURANCE CONTRIBUTIONS IF ALREADY PAID.


VAT
The whole VAT issue is a long story but I will give relevant points.

There are 5 types of VAT that apply to items:
·         Standard
·         Exempt
·         Reduced
·         Outside Scope (e.g. out of EU)
I’m not yet VAT registered. Compulsory registration is £73,000 in last 12 months and sadly – let’s say it’s been a bad year.
However if you do the calculations and it looks beneficial and you may hit that mark soon, you can apparently do a “Mischievous Registration” in anticipation of hitting that mark.

What I didn’t know was any VAT registered person/business can claim back any VAT they’ve had to pay on items. So for example: I hire a vehicle for work. I pay 20% VAT. If I’m registered I can claim that VAT back in my VAT annual Tax return (a separate entity for your Tax Return). The only change I have to make is adding VAT onto my costs. However if you are being employed buy a VAT registered company they won’t care because they too can claim it back. If it’s starting to sound like a secret party for the boys – it’s probably because it is. All we need to do is get our budgeting right and in 10 years we’ll be at the party too! #Optimism

Tips
·     If you can have a separate personal Bank Account for you and your work (not necessarily a business account). Separate any incoming and outgoings to make bookkeeping easier.

·     Do any credit control or enquiring over the phone rather than in writing

·     Double check anything you’re unsure of with Equity or HMRC

·    Let the Tax Office know well ahead if there are going to be any major changes like LESS MONEY COMING IN.

·     Investigate in detail allowable expenses for Tax Return

·     Make a contract if going into business. Even if it’s a sibling or your best friend. A little bit of paper with expectations and a signature can save a whole heap of madness.

·     Get a programme to help with bookkeeping. They’re fairly inexpensive or even FREE on iPhone. After a while, one touch of a button and your whole budget is done.

·     Join Equity http://www.equity.org.uk/home/
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Final Note
It is OK to get an Accountant to do your return if you feel more comfortable that way, but at least get an understanding of what’s happening with your finances so you can ask for a report/ copy of your return and it will make sense.


Useful Links

·         FEU Digital Learning Centre: http://www.feutraining.org/digital-learning-centre/

·         Intellectual Property Office: http://www.ipo.gov.uk/

·         London Freelance Rates Guide: http://www.londonfreelance.org/rates/owners/_nuj_lfb.html

·         HM Revenue & Customs: http://www.hmrc.gov.uk/index.htm

·         Foreign Entertainers Unit (FEU) http://www.hmrc.gov.uk/feu/feu.htm





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