WARNING: The following is only a rough guide into paying tax as a musician and is second hand information that I am passing on to you from my accountant. I am not qualified to give any formal advice myself and you should always consult a professional if you are at all unsure. For more info visit tax.gov.
Part Time Musician With A "Real" Job
Yes you can treat any paid teaching or playing you do as self employment and should register with HMRC within 3 months of this starting, call them on 0845 915 4515 or go to www.tax.gov to find out more about the various different options available to you for registering as self employment, but I do recommend ringing them to do this. If you make a loss due to the purchase of the instruments or other day to day expenses, then that loss can be offset against your employment (if you still have a regular job), which will create tax refund.
Examples of day to day expenses will be travel, the heating and lighting if the pupils come to you, advertising costs, CRB checks, teaching books and other things you purchase and pass onto the pupil etc, whereas the purchase of instruments and equipment are claimed under Annual Investment Allowance (formerly known as capital allowances) as these items have a shelf life of many years.
The good news is that you can stand to claim 100% of the value of Annual Investment allowance items and musical instruments fall into that category. If you already own instruments and use these, then these will fall under the old capital allowance rules. If you purchased the gear in this tax year before you registering, they would be treated as starting up capita costs - so the Annual Investment allowance would apply (full 100% can be claimed). The only restriction I should advise is if there is any private usage (Not for gigs but for your own enjoyment).
There is not a minimum amount of lessons you would have to give to qualify as self employed but it would need to be more than one, and there would be a expectation that you advertise to be a viable trade. Its fair to say that businesses take time to build up - so as long as there was growth rather than it being a hobby then that is fine.
Once you have alerted HMRC that this self employment (even though part time) has started, then after the first 5th April, they will send you a self assessment return to fill in, with an employment page for your salary from your regular job and a self employment page for the income, less expenses and capital purchases, for the self employment. The loss from self-employment is then taken from the employment income, the tax recalculated on the new position and a refund will arise and be made to you. If, at this time you wish to seek out an accountant - then they can help you fill in the forms. Make sure to keep records of all your income and receipts for all expenses incurred whether you choose to use an accountant or not, as you need to keep good records should HMRC ask to see them.
Music or any other type of lesson you take even if it’s to enable you to provide a better service to your customers cannot be claimed as these are not classed as business related expenses and nor are the materials you need to be taught to undertake this training.
Full Time Musician
By the time that you are undertaking this full time, the only difference will be that you a have a greater income to declare on the self employment and no income to declare on the employment but you will still fill in a self assessment tax return and declare all your income/expenditure after each 5th April, just then you will have a tax bill (assuming you start to make a profit) and the tax is paid each 31st Jan and if this bill is ever more than £1000 then you also start being asked to make payments on account each 31 Jan and 31st July - so that you are making regular payments towards the following years bill.
By Alex Kehoe