NEWS AND BLOG

Royalties are considered taxable income in the UK, and if you’re earning from streaming, sync deals, radio plays and more, it’s essential to report this income on your tax return. In some cases, royalty payments may qualify as tax-deductible expenses. However, if your total royalty earnings for the tax year are less than £1,000, you won’t need to file a tax return. If you’re working in the UK with domestic clients, it’s important to anticipate paying taxes on any royalties you earn.

The first step is registering as self-employed with HMRC (or the relevant tax authority in your country). Once registered, you’ll be required to file an annual self-assessment tax return to report your earnings and pay your taxes.

• You can earn up to £12,570 tax-free per year (UK England and Northern Ireland personal allowance).
• Income above this is taxed at 20% (basic rate), 40% (higher rate), or 45% (additional rate), depending on your earnings.

If you’re self-employed, you’ll pay Class 2 NICs (£3.45 per week) and Class 4 NICs (10.25% on profits between £12,570 and £50,270). Profits over £50,270 are taxed at 3.25%.

You may be able to offset costs like studio time, travel, and agent fees to reduce your taxable income.

The music industry offers many ways to earn, but each stream has its own tax rules. Here’s how they differ:

• Money from live gigs or studio work is taxable as self-employed income. 
• Deductible costs may include travel, rehearsal space, and equipment hire.

This includes income from intellectual property, such as songwriting or recordings. Types of royalties include:

• • Mechanical Royalties (e.g., from sales or downloads). 
  • Performance Royalties (e.g., radio or live performances).
  • Sync Royalties (e.g., licensing for TV, film, or ads).

If you sell branded merch, this is also taxable.

• Advances are taxable when received, even if they are recoupable against future royalties. 
• Depending on the amount of the advance, you may need to register for VAT as a limited company.

Freelance session fees count as self-employed income, with similar expenses like studio hire or instrument rental being deductible.

Any tax season doesn’t have to be stressful. Here are a few tips to keep things simple:

Keep detailed records of your earnings and expenses, either manually or with accounting software.

HMRC requires payments in January and July, so plan ahead.

An accountant who understands the music industry can make life much easier by helping you maximise deductions and avoid late fees and penalties.

Taxes might not be the most exciting part of your career, but staying on top of them ensures you keep more of what you earn and avoid surprises. With the right strategy and support, you can focus on your passion without the stress.