Managing Your Finances as a Self-Employed Musician

As a self-employed musician, managing your income is key to sustaining your career. Whether you’re gigging, teaching, or recording, staying on top of your earnings, expenses, and taxes will keep your finances in tune. Here’s the blueprint for getting started! 

Gross Profit is the total sum you are paid

Step 1: Calculate Your Gross Income

Gross income is the total you earn before expenses. Include everything: gig fees, teaching payments, and royalties.

Example:

  • January income: £500 from gigs + £300 from lessons = £800
Expenses are any cost you can attribute to your business; food, drinks, travel, equipment, marketing, etc

Step 2: Track Allowable Expenses

Deduct work-related costs to reduce your taxable income. Common musician expenses include:

  • Instruments and equipment (e.g., guitar strings, amps).
  • Travel (mileage, van hire).
  • Showreels & other marketing tools
  • Practice space (studio rent or a share of home utilities).
  • Promotion (website hosting, ads, posters).
 

Keep receipts and only claim the business portion of mixed-use items, like your phone.

Example:

  • Guitar strings: £30, travel: £50, website hosting: £10 = £90
Net income is Gross Pay minus Expenses

Step 3: Work Out Your Net Income

Net income is what’s left after expenses.

Formula:
Net Income = Gross Income – Expenses

Example:

  • £800 – £90 = £710
Tax is paid on whatever is left once your expenses have been disregarded

Step 4: Estimate Taxes

Tax is a complicated element of your income that doesn’t need to be as complicated as it sounds.

  • There are many things that can affect it depending on how much you earn, national insurance and other factors. 
  • Rule of thumb is save 20-30% of your income and keep ready to submit end of January each year. 
  • Get yourself an accountant – they will save you more than they cost and will also take away the headache of doing your tax yourself! 

 

NOTE: You won’t end up paying that much so you get nice little bump in January when you submit! 

You can further invest your take home pay into savings, investments, pensions and other elements that will pay off in the long term

Step 5: Calculate Take-Home Pay

Take-home pay is your net income minus taxes.

Example:

  • if your Gross = £100 and Expenses = £200, your Net = £800
  • Your Net = £800 – Tax (20%) = £160, your Take Home = £640
 

To summarise

  • Save for Taxes: Set aside 20-30% of income for future bills.
  • Stay Organised: Use apps or spreadsheets to track income and expenses.
  • Invest in Advice: An accountant familiar with the music industry can help optimise your finances.

 

By managing your income effectively, you can focus on creating and performing while keeping your finances in harmony!