Value Added Tax (VAT) for Creatives: Do You Need to Register, and What Does It Mean?

If you’re a singer, songwriter, artist, influencer, or performer making money from your craft, you’ve probably heard about VAT. Maybe someone asked for a VAT invoice, or you’ve seen it on your receipts and wondered, “Does this apply to me?”

VAT (Value Added Tax) can be confusing, and many creatives don’t realise when they should register—or if they even need to at all. Let’s break it down in a way that actually makes sense.

1. What is Value Added Tax (VAT), and Who Needs to Register?

VAT is a 20% tax added to most goods and services in the UK. Businesses that earn over £90,000 per year (as of 2024) in VAT-taxable turnover must register for VAT.

This means:

• If your annual income from gigs, commissions, merch, sponsorships, streaming royalties, or services reaches £90,000, you must register for VAT and charge it to your clients.

• If you’re below £90,000, VAT is optional, but some creatives voluntarily register if it benefits them.

2. What Counts Toward the VAT Threshold?

Not every penny you earn counts toward VAT registration. What matters is VAT-taxable income, which includes:

• Paid gigs, performances, and commissions

• Selling artwork, merchandise, digital downloads

• Sponsored posts, brand deals, affiliate marketing income

• UK royalties from books or music

• Paid workshops, coaching, or teaching services

Things that don’t count toward the threshold include:

• Grants or donations

• International royalties from books or music (which may be VAT-exempt)

• Certain payments from overseas clients (depends on the VAT rules for international sales)

  
  

If you’re unsure whether you’re close to the £90,000 mark, keeping clear financial records is key.

3. What Happens If You Register for VAT?

Once you’re VAT-registered, you’ll need to:

• Charge 20% VAT on most goods and services you sell (unless they’re VAT-exempt).

• Submit VAT returns to HMRC (usually every 3 months).

• Pay VAT to HMRC, but you can also reclaim VAT on eligible business expenses.

  
  

Example:

• You charge a client £1,000 for a live performance. If you’re VAT-registered, you now must charge 20% VAT, making the total bill £1,200. That extra £200 goes to HMRC, not your pocket.

  
  

4. Can VAT Registration Help You?

Some freelancers and creatives register for VAT voluntarily, even if they don’t hit £90,000, because of the benefits:

• Reclaim VAT on expenses – If you buy expensive equipment, software, or studio space, you can claim back the VAT you paid on those items.

• Look more professional – Some bigger clients prefer working with VAT-registered businesses.

• The Flat Rate Scheme – If your VATable income is under £150,000, you might be eligible for this simplified VAT scheme, where you pay a lower fixed VAT rate.

  
  

But voluntary VAT registration isn’t for everyone. If most of your clients aren’t VAT-registered themselves, they might not like paying an extra 20% on your fees.

5. VAT and International Work

If you work with clients outside the UK, VAT gets even trickier:

• If you provide services to clients outside the UK, they might be outside the scope of UK VAT (meaning you don’t charge them VAT).

• Selling digital products to EU customers? You might need to register for VAT OSS (One Stop Shop) in the EU.

  
  

Getting advice from an accountant can help you avoid VAT mistakes when dealing with international work.

6. What Happens If You Ignore VAT?

If your income goes over £90,000 and you don’t register for VAT, HMRC can fine you and charge backdated VAT on your earnings. Even if you go slightly over the threshold, you’re still required to register, so it’s important to track your income carefully.

Should You Register for VAT?

• Under £90,000? You don’t have to register, but you can if it benefits you.

• Over £90,000? You must register, charge VAT, and file returns.

• Selling digital products abroad? Different VAT rules might apply.

  
  

If you’re close to the VAT threshold or thinking about registering voluntarily, it’s worth reviewing your finances and understanding how it will affect your pricing and expenses.

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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