Royalty Accounting Basics for Creatives in the UK

If you're a singer, songwriter, artist, influencer, or performer making money from your work, you might already be earning royalties—or at least hoping to. But how do you track them? How are they taxed? And what should you do to keep your finances in order?

Royalty income can be complicated—payments often come from multiple sources at different times. The good news? Understanding royalty accounting helps you stay on top of your money, avoid tax headaches, and make sure you're getting paid properly.

1. What Are Royalties, and How Do They Work?

Royalties are payments you receive when someone uses your work. They’re common in music, publishing, and digital content, and they can come from different sources:

• Music Royalties – Earned when your songs are played on streaming platforms, radio, TV, or in public places.

• Publishing Royalties – If you’re a songwriter, you get royalties when your songs are performed or recorded by others.

• Art & Image Licensing – If you create artwork, photography, or designs, you can earn royalties when others use or sell them.

• YouTube & Digital Creator Royalties – If you’re a YouTuber, podcaster, or social media influencer, you might earn royalties from ad revenue or licensing your content.

  
  

Unlike standard freelance work, royalty payments often come in months (or even years) after the original work was created, making it tricky to track and plan for.

2. Keeping Track of Your Royalties

Royalty payments often come in from different platforms, making it hard to know exactly what you’re earning. Here’s how to stay on top of it:

• Check Your Statements – Keep track of PRS for Music, PPL, MCPS, YouTube AdSense, Spotify for Artists, and publisher reports to ensure you’re receiving all payments.

• Record Every Payment – Use a spreadsheet or accounting software to log where your royalties are coming from and how much you're earning.

• Separate Personal & Business Finances – Having a dedicated bank account for your creative income makes it easier to manage.

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If you receive royalties from multiple platforms, an accounting app like QuickBooks, FreeAgent, or Xero can help track everything in one place.

3. How Are Royalties Taxed?

In the UK, royalty payments are taxable income. This means:

• If you earn over £1,000 per year from royalties, you must register for Self-Assessment and file a tax return.

• You’ll pay Income Tax and National Insurance on your royalties (after deducting business expenses).

• If your total income exceeds £90,000 per year, you may need to register for VAT (though many creatives don’t reach this threshold).

  
  

Since royalty payments are unpredictable, it’s a good idea to set aside around 20–30% of your earnings for tax to avoid surprises at the end of the year.

4. Deducting Expenses from Your Royalties

You don’t pay tax on everything you earn—you can deduct business expenses related to your creative work. Some royalty-related expenses include:

• Studio costs, recording sessions, and production fees

• Distribution fees for streaming platforms (DistroKid, CD Baby, etc.)

• Music promotion and marketing costs

• Legal fees for contracts and licensing

• A portion of home office expenses (if you work from home)

  
  

Keeping clear records of expenses means less tax to pay—so always save your receipts.

5. What If You Get Royalties from Outside the UK?

If your music, art, or content is used internationally, you might receive royalties from overseas sources. This can create tax complications:

• Some countries withhold tax on royalties before paying you. You may be able to claim this back through a double taxation agreement.

• If you receive royalties from the United States (such as YouTube, Spotify, or publishing deals), they may withhold 30% in tax—but you can apply for a reduced rate by submitting a W-8BEN tax form.

• You may need to declare foreign royalty income separately on your tax return.

  
  

If you regularly earn international royalties, consider speaking to an accountant to ensure you’re not overpaying tax.

6. Do You Need an Accountant for Royalty Income?

If you’re only earning a small amount from royalties, you can likely handle your own bookkeeping with basic software or a spreadsheet.

However, if:

• Your royalty income is growing fast

• You’re earning royalties from multiple sources

• You’re receiving foreign royalties with tax complications

  
  

…it might be worth getting an accountant who understands creative finances (like us!). They can help reduce your tax bill, claim deductions, and manage VAT if needed.

Final Thoughts: Stay Organised and Keep More of Your Money

Royalty income is a huge win for any creative, but without proper tracking, it can lead to messy finances and tax issues.

• Keep a record of every royalty payment

• Set aside money for tax so you’re not caught off guard

• Claim allowable expenses to reduce your taxable income

• Consider using accounting software to make life easier

  
  

With a bit of organisation, you can enjoy your royalty income stress-free—and focus on doing what you love.

If you're ever in need of help with setting up a limited company, sorting out your bookkeeping, accounting and tax submissions or would like some personal financial coaching, drop us a line by clicking on the 'Contact Us' button at the top of the page and we'll be happy to help.

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