When you’re trying to get your photography business off the ground, completing tax returns can be a real distraction – and a daunting one at that. However, it’s much simpler than you may think. Here, we explain how business expenses work and which expenses you would include on your tax returns. This is our guide to completing tax returns for start-up photographers.
How do business expenses work?
When you are running your own photography business, there are plenty of running costs that you have to deal with. These could include the equipment you buy, the studio space you rent, the cost of electricity and internet – and, of course, your photography insurance.
Fortunately, if you claim for these running costs as expenses when you file your annual tax return, you could get a reduction on your tax bill to accommodate them. Here are a couple of example scenarios to give you an idea of what you can claim on your expenses and how much money you could potentially save.
Scenario 1: Kitting out a new studio
If you’re in the process of setting up a new photography studio – whether it’s a home studio or a space that you have bought or are renting – you will need to purchase a lot of new equipment.
When you are purchasing equipment, make sure you keep a track of what you’ve bought and how much it cost you. Here are some examples:
- Lighting: £2,000
- Camera equipment: £5,000
- Printer: £500
- Insurance: £103.71*
- Fixtures and fittings: £1,500
- Total: £9,103.71
*Price based on £7,500 of equipment and £1m Public Liability cover. Price correct as of March 2019.
As you can see, if you have equipment insurance, you’ll be able to claim the cost of this back on your expenses, as well as the equipment itself.
Scenario 2: Working on a shoot
As a professional photographer, you may be asked to travel to a photoshoot, for which you will need to purchase more equipment and travel a long distance.
There’s a high risk of accidents on a shoot and most venues will require you to have Public Liability insurance as a legal requirement to protect you in the event of any unfortunate accidents.
Here is a breakdown of some of the expenses you could claim for in this scenario (please note that these are rough guidelines):
- Mileage (200 miles at £0.45p per mile): £90
- Props: £200
- New lenses: £800
- Public Liability insurance: £41.21*
- Business cards: £110
- Total: £1,241.21
*Price based on £1 million of Public Liability cover. Price correct as of March 2019.
If you can track your expenses carefully and you keep receipts and other documents to prove how much you have spent, all of the above can be claimed back.
By claiming for expenses like the above, you can save money by only paying tax on your ‘taxable profits’. That is, the profit (or loss) upon which income taxes are payable.
As an example, if your turnover is £40,000, and you claim £10,000 in allowable expenses, you only pay tax on the remaining £30,000 – which is your taxable profit.
How do I calculate business expenses when I work from home?
If you spend most of your time working from a home studio, you’ll be able to claim several things back on expenses. This includes the cost of utilities, internet usage, phone usage, council tax, and mortgage or rent costs. However, you will need to find a method of dividing costs in your home.
For example, if you live in a house containing five rooms including your home studio, you will be able to divide your council tax by five in order to get the right figure for the studio.
When it comes to things like internet usage and utilities, however, it is more complicated. How much you pay depends on how much you use these things for work and how many days a week you are there.
What else can I claim on my expenses?
- Advertising and marketing costs: This could be website costs or any print adverts you have taken out.
- Staffing costs: If your business has grown to the point where you are employing your own staff, you will be able to claim for their salary, bonus, pension, and National Insurance contributions.
- Financial costs: You will be able to claim back on expenses if you have used an accountant or a solicitor for business purposes. You can also claim for any bank charges you may have, such as interest or overdraft payments.
Hopefully, our tips have simplified the tax return process and can help you go one step further in running a successful photography business.
Another crucial element of running your own business is ensuring you have the right insurance to protect yourself against a range of incidents and accidents. This way, you won’t lose money by having to pay out of your own pocket if something unfortunate were to happen.