Starting To Charge for Photography

If you're considering starting to charge for photography - even an occasional weekend wedding or a handful of portrait sessions alongside a day job - HMRC generally considers this self-employment, not a hobby, once you're doing it with a view to profit. This article discusses some areas, often overlooked, that need to be considered early in the process.

When To Notify HMRC?

The rule of thumb: if your total income from self-employment (all sources, including your photography) is more than £1,000 in a tax year, you must register with HMRC and file a Self Assessment tax return. This is total (gross) income from trading, not net after expenses have been considered.

The deadline for registering is 5 October following the end of the tax year, but it makes sense to notify them as soon as you've taken the plunge and started to take money. Further details on this important step are covered by the blog post Do You Need to Register as Self-Employed as a Photographer?.

Keeping Records

It is important, even if you expect income to be below the £1,000 limit mentioned above, to keep records. At this point, a simple spreadsheet will suffice. A simple sheet with columns that record

• Date of transaction

• Description

• Amount

• Whether the transaction is income or expenses

will start you off on the right footing.

Over time, using dedicated bookkeeping software will allow you to provide electronic invoices, capture images of any receipts, and link it to your bank account. Incidentally, all of the Services offered by us at Viewfinder Accounting include a QuickBooks subscription in our monthly fee.

Bank Account Considerations

In the Early days, you may consider just using your personal bank account to receive income. A couple of words of caution - firstly, your bank may not appreciate this, and secondly it is better to get out of bad habits as soon as possible. Setting up a free bank account (Monzo, Starling & Tide all offer free sole trader accounts) is quick and easy.

One final consideration, for having segregated banking - if HMRC were ever to challenge your early income (as unlikely as that may be), they could request copies of bank statements. If you have a separate business account, their request will be limited to that account - if you bank your photography income to a personal account, then HMRC will have visibility of all your personal income and expenses.

Camera and Equipment

By it's very nature, it is very likely you will already have a camera, selection of lenses and other equipment that you have used in your hobby, which you will now use in your business. This introduces a little complexity, often overlooked, which is best dealt with at the time you start trading.

Typically, were you to buy a camera, lens, or other photographic equipment, you would claim capital allowances, or claim the cost as an expense (depending on how you are preparing accounts). However, you will be using your existing, personal equipment, and so have no "cost" to claim.

Establishing Fair Value

In this scenario, you need to establish your equipment's current fair value. This is easy to do using websites that sell used gear (for example Wex, MPB, or eBay).

For each personal item you plan on using in your business, follow these steps:

• Find a comparable item, taking account of condition, shutter count, etc

• Record the sale price of the item, and also take a screenshot/print to PDF for your records

This becomes your "cost" of each piece of kit. Note: for eBay it is recommended you filter to "Sold" items, and chose items sold recently - an item for sale for a certain price on eBay does not necessarily represent a fair value.

Example - Valuing Personal Equipment

Paul decides to start taking on small photography jobs. He has a Nikon Z6 (that cost him £1,800), and a 24-70mm f4.0 lens (cost £800), which he will now use in his business.

The Nikon Z6 is in excellent condition, and has a shutter count of 15,000. The lens is in good condition.

Paul reviews Wex, and finds the current replacement value for the camera is £600, and the lens is £300. He keeps a record of his findings, in case HMRC ever enquire on how the value was created

Private Use Adjustment

Once you have a fair value for the equipment you plan on using, you need to consider whether going forward there will be ongoing personal use.

It is likely that in addition to the new business use there will be ongoing personal use.

There are a number of ways to consider and determine private use vs business use:

• Time Based - days or hours for personal vs business - keep a log for ease of calculating

• Picture Count - over the year, how many photos were taken privately vs for the business (Lightroom Collections and date filtering will help)

• A Realistic percentage estimate

You can choose whichever method suits. However, once chosen, that method should continue for calculating private use for that item in future years

Example - Private Use

Following the example above, Paul has equipment valued at £900, which he now uses for his Wedding photography business. At the end of the year, Paul reviews Lightroom, and confirms that he took 7,000 photos in the last year: 6,500 at Weddings, and 500 personal. He therefore has 7% private use, and will adjust his equipment claim accordingly, and claim expenses/capital allowance on 93% business use.

Summary

Getting started in the right way will put you in a strong place when you come to prepare your first tax return - having detailed records, seperate banking, and fair value and usage for all of your equipment will remove a lot of the headaches encountered when trying to prepare your first set of accounts.

Key Points

• Gross Income from self-employment of £1,000 or less does not need to be declared to HMRC

• Income records, regardless of level, must be maintained

• Consider setting up a bank account early

• Ensure you keep records of equipment used in the business to aid claiming.

How Viewfinder Accounting Can Help

We can deal with all aspects of this for you, from registering with HMRC, setting up your bookkeeping process, and dealing with your ongoing tax and accounting obligations.