Taxes and record keeping

Taxes and record keeping

It’s that time of year again. The end of the HMRC tax year was last week and we self-employed artists should start thinking about getting all our records together to do our tax returns as soon as possible. NB for the benefit of my readers in the USA, HMRC is Her Majesty’s Revenue & Customs, the UK’s equivalent of the IRS.

“But tax returns aren’t due until the end of January 2023!”, I hear you screaming at me. Yes, you are quite right, they aren’t due until then. However, if you get your returns done beforehand you won’t experience that crazy, panic stricken feeling you go through every January when you only have hours left before they are due in. You know what I am saying makes sense, so this year just try and get them started now and all done and dusted before the kids go back to school/university in September. I promise you will feel so much better doing them ahead of time.

Tax returns

A word of warning. If you think none of this applies to you because you “only” sell a few paintings each year, you need to be sure. It is best practice to keep records regardless but if your annual sales are over £1,000 you are legally required to fill out a tax return. I can’t advise you on how much tax you might have to pay but HMRC are really approachable and will give you all the answers you need, plus their website has tons of up-to-date information on it.

Clearly, if you have income from a job, pension, or anything else, all these figures need to be added together and HMRC informed. As a quick guide, the annual personal allowance is currently £12,750 so if your only income is from self-employment and your profits are less than £12,570 then you will not pay any Income Tax. However, if your annual gross income is over £1,000 you must inform HMRC. If you are not sure, call them. It is always better to be safe than sorry.

Stock Records

Filing tax returns is not the only record keeping you really should or need to do, even if your sales are well under the threshold. I suspect you probably produce many artworks which never actually see the light of day. So, what is the best way to keep a record of what you have created. What is the cost of making the work and why should you keep a record?

Keeping records helps you when it comes to trying to locate past works. My advice to you is to either set up a spreadsheet or, if computers are not your thing, buy a notebook and start keeping a record. If you want to buy one with it all done for you, you could try one of these artist’s logbooks, produced by web designer Tracey Rissik, AKA Silver Moon Designs.

Tracey has created a website for her various notebooks/planners etc., https://silvermoodesigns.uk/planners/ and you can find the artist’s log at the top of the page. You can also click on a preview to see the page layouts. Alternatively, if you prefer, there is a link to Amazon – Https://mybook.to/myartprojects which goes to the appropriate site for the country in which you are based. Currently that should work in the UK, USA, Canada, Australia, Japan, France, Italy, Germany, Spain, and the Netherlands.

It is considered best practice to give each of your artworks a title, but whether you do or not, I strongly recommend that you number them for record keeping purposes. I suggest you start with a high number, such as 101 or 1001, just because it gives more credibility to your work if it doesn’t look like it is your very first piece. My husband looks after the numbering of my work, and he starts off each new year with the last two digits of the year followed by a two-digit number, e.g. 2201 for this year’s first piece. If I do produce more than 99 paintings this year, he would record number 100 as 22100.

Write the number on the back of your artwork, together with the title (if there is one) and your signature. Even if you have signed the front, sign the back too and date it. If you decide to bin the work, make sure you put that in your records, too. I have been known to reuse canvases. In such cases I make sure that the old number has a note against it, and I use a new number. I do this because I want to keep my paintings, prints etc. together as bodies of work from a certain time and on a particular theme. It is just neater and make sense when working in a series.

The system I used to use involved taking a photograph of every piece and printing a passport size image which I stuck on a record sheet and wrote alongside it the title, medium, size, orientation, price, and frame colour. These days, because my husband keeps a spreadsheet of my work on his computer and he prints all my labels from that, I have him print off three labels for me. One is for the back of the artwork, one for the front to use at exhibitions and the third I stick to an index card. Any information, including when it sold and who I sold it to, gets written on the back of the card. The same applied to my old system; I would mark off in the folder when a piece of work was sold and in both cases I would let my husband know so that he could update his spreadsheet.

Financial/accounting records

I always file my tax returns early and at least three months before the deadline. Why? Well, getting them done and out of the way is one less thing for me to worry about. Also last year there was a problem with my HMRC account which took them about three weeks to resolve. So, by filing way in advance, I was able to resolve the issue before the deadline and so avoided the £100 fine they impose for being late. Be ready for things to go wrong and have it done early, then you can rest easy at night.

I have a reminder set in my Outlook calendar which informs me on the first of each month that my accounts need to be updated. I would love to tell you that I do my accounts monthly and, as a former accountant, I really should, but I don’t. The reminder is there so that if I can see a free space in the coming week, I can slot that into my bullet journal so that I can get it done. June is normally my busiest month so as soon as it is over, I put aside three days to update my records and I do them. It never takes three days, but just in case there is a problem the three days are there for me to use.

However, reminding myself every month does make me think about how much has happened financially during that period. As sales and purchases have been fairly limited during the Covid-19 pandemic, I know I can get everything up to date in one day but setting three days aside allows for any emergencies. If you are very busy selling work every month you will already be producing tax records so much of what I have said here is superfluous, but I suspect you are not all on top of your accounting records. If you are selling lots, carve out a regular monthly timeslot so that you can stay on top of things.

Putting off your accounts when you know you have made lots of sales and purchases because you don’t like doing them is not a good idea. If you have consistent sales, you have a business. If you have a business, producing proper records is part and parcel of running it. You need to know what is going on in your business. I can tell you to the penny exactly how much money I have in my business account; I know what purchases I need to make to produce work; and I know what income I am due to receive through commission pieces.

I don’t know how many sales I will make at an exhibition. That is the only unknown, and if I do really well, then I do a catch up of my accounts within a couple of days of that exhibition ending. If you really can’t cope with producing accounts, which are very simple, honestly, get yourself an honest, reliable bookkeeper. It won’t be cheap but if you are selling enough, it might be your best option.

Email list

Another really important set of records you should keep is of who has bought work from you. If someone has bought from you, they are far more likely to buy from you again, but unless they know how or where to buy from you then they are unlikely to take the time to find out. You need to nurture these people. So, start building that list of contacts and, in particular, their email addresses. Once you have an email list you are able to let people know what you are doing and when/where you are doing it.

You may only exhibit with your local art group once or twice a year. Most art groups share the buyer’s details with you. Contact the buyer, thank them for buying from you and ask them if you can add them to your email list. Then, every time you are preparing for an exhibition you can email the people on your list, share details of the work you will be exhibiting, give them information about the exhibition and invite them to the Private View.

Make your buyers feel special because if they have bought from you, they are special.
I publish a monthly newsletter. It is where I let my followers know about new works, exhibitions, and any other projects I am taking part in.

NB Just for the record, I do not get paid to endorse any of the people or brands I have mentioned above. These are all products that I use and genuinely believe in and people I truly admire.

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