Value Added Tax (VAT) is a tax charged through a business on their products and services. You only need to register to collect VAT if your income is over a certain amount. Most artists will not need to register for VAT.
There are three rates of VAT depending on the products or services the business sells. You only need to register to collect VAT if your income is over a certain amount.
You get charged VAT on:
- Products. This includes artworks or other physical things you make.
- Services. This includes work you do, like talks or performances.
A company needs to charge you VAT if they have registered. You cannot avoid paying VAT. When you go to the shops you will pay VAT on almost everything you buy.
If you are VAT registered you have to charge VAT on all your sales. If you are selling products or services in the EU the rules are different. Talk with a specialist accountant if you are selling products or services outside the UK.
If you are not VAT registered you are not allowed to include a VAT charge on your invoices.
You can register for VAT even if you do not have to. People who are VAT registered have to report every 3 months (‘quarterly’) on sales and expenses. You can then also recover the VAT you have had to spend on your expenses. Small businesses can simplify VAT reporting by:
Once you are VAT registered your work will be more expensive to employers who are not registered.
It is not usually worth registering for VAT if you earn a low income and do not have to. If you are interested, talk to your accountant.