Hi All,

I have been DJ'ing for a little while now, started off just helping a friend out but soon got a taste for it and am now looking to start up on my own. However, I have absolutely no idea where to start when it comes to setting up as a business. Any pointers and advice would be most welcome. Many thanks.

There is some good info on the DJ Associates website;
http://www.djassociates.org/dj_association...tion_guides.htm
Lots to digest there - but should help you start off.

Basics:
Within 3 months of trading, you need to tell HMRC what you are doing (starting a small business).
You will need to pay Class 2 national insurance contributions, unless your turnover is less than ~£5K PA, in this case you will need to apply for "small earnings exemptions"

Then, keep track of all travelling (mileage), purchases (gear/music etc), and expenses (phone calls/web hosting/advertising/insurance etc)
Also keep track of bookings/deposits paid etc.

Best to do this on a spreadsheet, unless you have an accounts package.

That is the bare essentials.

The rest really depends on the type of DJing you want to do.
If you're mainly doing club/pub work, then its doubtful that you'll be issuing contracts/terms/paperwork.
If you're mainly doing private parties, then creating a booking form/terms etc for clients to sign would be advised.

Not only does this show you're a serious business, but it details what is/is not acceptable for you (so violence aimed at you during a gig will result an early finish with no refund).

Anyway - let us know what you want to do, and aspirations for the future...

Jason

That's great Jason, gives me plenty to go on many thanks.

My intention is to DJ at Weddings, private parties etc as that is where I have built up some experience. Plus I really enjoy doing weddings, it always seems a pleasure to be part of the happy couple's big day. I like the idea of the contract. We have never experience violence towards us luckilly but on one or two occasions some drunken numpties have got a bit lairy, especially when politely requested to stop leaning on the rig etc. This will be even more prevailent once I set out on my own.

It will not be my main source of income, I have a day job Monday - Friday. My intention is just to use DJ'ing as a hobby that hopefully brings in a bit of extra cash. Always a requirement when you have a 2 year old boy who eats like a horse and anothe baby on the way...!!

Whether operating full-time, part-time or as a hobby, if you accept money for your service, you may wish to be aware of the law and your obligations as a service.
Suggest you also read this post.

Wow, scanning through that thread I nearly fell off my chair, did someone say the tax man takes 40% of your earnings? Would this be the case even if I was earning less than £5k p/a? Hardly seems worth the bother if that's the case?!

Initially my plan is keep my day job and work part time as a DJ to supplement my income. However if the business takes off then maybe I would look to go full time at some point in the future. I want to do things properly, I want to offer a good service and be above board, i.e. PAT, PLI, TAX etc., I don't believe in offering a crap service and cutting corners.

For those who have been there and done it, I would ask the following advice:- In reality is it worth my while setting out on a part time basis if the tax man is going to take 40%, on top of the other costs? What I mean by this is can I make it a profitable business on this basis?

Is it best to set up as a Sole trader or ltd company? I understand that as a Ltd company any debts the company may incur are attached to the company, whereas a sold trader must shoulder the burden himself. This aside, are there any tax benefits?

Well - the actual tax deducted will vary with your personal tax situation.
If you're scraping by on Min wage, then you'll be well under the 40% threshold.
Also - you are only taxed on your profits... so legitimate expenses for running the business are taken out (normally).

So - 1st and probably 2nd year will see equipment and music costs probably meaning you may not show a profit, unless you are very busy.

As an example - say £800 on gear, music £1000, and travelling (@40p/mile) should take your year 1 expenses to over £2K
(there are other things you can add as deductions, but these are the main obvious ones).

So... say you're doing pub gigs/small parties for £150/night.
20 gigs year one (optimistic?), will return you £3000.
If you have receipts to prove the expense, you will only get taxed on the profit;
£3000 (income) - £2000 (expenses) = £1000 (taxable income)
If you divide this up, you'll soon see that you'll initially be working for £1000/30 = £33 per night (then taxed..).

Now, as you get more experience and want to take on better gigs, you may need your gear pat tested (~£50), and Public Liability (£30 upwards, depending on what you need)
It does make good sense to get this done early on - but in reality it will depend where you're playing.

Again, these are legitimate expenses. You may decide to join an association (MU/SEDA/NADJ), and their subs can also be deducted.



Just to clarify the tax system;
Most people have a tax-free limit (termed Personal Allowance. Those with company cars or lots of taxable perks may have zero tax-free limit.... I've had this!.

Ok the current 2010-2011 Personal Allocance is £6474pa - so you can earn up to this value per year, before you start to pay Income Tax.

Next, there is the Basic Rate, with most people pay. This is 20% of any income OVER your Personal Allowance, up to £37,400

So, someone earning £20K, will pay tax on £20,000 - £6474 = £13526. They will pay 20% of £13526 (£2705)

For the higher earners, there is a higher rate of 40% for earnings of £37,401-£150,000

So, someone earning £38K, will pay 20% on £6474 to £37000, and then 40% on £37001 to £38000

Details from: http://www.hmrc.gov.uk/rates/it.htm

I'm in the 40% margin - so any OTHER income is taxed at 40% (DJing/Web development).

National Insurance
Ok - with income Tax sorted... We now have National Insurance contributions..
These are paid automatically by your day job employer. However, as a 2nd business, we also need to pay contributions.
IF your expected turnover is less than £5,075, you can apply for a Small Earning Exemption - so you won't have to pay.
If you do not claim this, you'll need to pay £2.40 per week (£124.8pa)

Details from: http://www.businesslink.gov.uk/bdotg/actio...ang=jwddifcmtiz

So, the 40% IS high, but if I was earning less on my day job, then it would be 20% tax.

Hopefully you can see how the system works. As someone self employed, there are means to reduce your tax bill, that are not available to you when employed for your day job.

This is background info only - speak to a professional, or even the HMRC / Inland revenue for advice..!

Also remember that you have 3 months to register as self-employed, and if you are doing pub/bar work, then you can easily be traced as pubs need to keep records of who they pay (cleaners/bar staff/entertainers)

I hope this helps!
Jason





"Probably" sole trader. Ltd comes with more accounting overheads (submitting annual accounts to Companies house etc).
Most companies like dealing with a Ltd Company - but personal clients don't really care.
There may be tax benifits - but the overhead of running a Ltd Company as a part-time enterprise will certainly mean these are lost.
The main difference is that a Ltd Company is seen as a legal entity, the Ltd Company will pay corporation Tax, with employees paying their own tax. Shareholders can be granted dividends. However, you'll see that this gets messy unless you really know what you're doing OR you hire an accountant (who will cost more than simply filing your personal tax returns)

If its going to be only you DJing, and you're just starting out, then Sole Trader status is what most people will do.
If you carry Public Liability, and follow good practices, then you should never incur debts for the business.

If you crash a T-Bar through an expensive Window - then you need to think about your liabilities... a £3000 bill, and possible loss of earnings could be very costly.
A speaker/light falling on someone and breaking bones will also be costly against you personally.

Hi All

Where abouts are you JP?

I think Jason has covered pretty much all you need to know, but hopefully hasn't scared you off ! ;-)

Best advice I can offer, get a really good accountant, happy to put you in touch with mine if you don't have someone nearer

Cheers

Pete

Well covered Jason

Cheers - but it does make grim reading if you're expecting easy money :-(
I think Dan has said this a few times, that its harder to turn a decent profit when you've got a day job.
This is true - but its also a good thing to have a 2nd income that COULD turn in to something more substantial if the day job ended- at least SOME income, when most part-time work is min-wage.

If you turn £300 a week from DJing as your sole income, then you'll take home about £13K for working about 15hrs (possibly less).
Many people earn less for a 38hr week, and have to pay for their commuting costs (whereas you will be able to claim traveling expenses to gigs)

Petes comment is also useful- getting an accountant. They will know various legal accounting "Tricks" that will really help, and their knowledge should mean that their fee is really paid from the savings they provide.

For anyone starting out - save ALL those receipts, CD's from Charity shops, Lamps, fuses from Homebase etc... £0.50p here and there will soon add up to £10 and more.
Then create either a spreadsheet, or a simple text file, detailing income and expenses for each month.

April 2010 Income
£xxx Gig xxxx Wedding Venue
£xxx Gig xxxx Pub
£xxx Gig xxxx Johnnys 5th Birthday

Total Income: £xxx


April 2010 Expenses
£15 Lamp for Moonflower
£14 Now 75 CD
£10 Hits 101 80's CD
£80 Fuel to above gigs @£0.40/mile
£5 Telephone
£5 Webhosting for Website
....

If you do this each month, and save supporting receipts- it'll make the accountants life much easier.
If its not allowable, the accountant will soon tell you.


It does sound grim - but is no difference to a Day job... its just that you get to "feel" the income. In your day job, you'll be PAYE, so the money in your bank is your's to spend.

One good thing from working like this, is that you'll be very aware of your costs, and so this should lead to you realising that spending £1000's on new kit will mean that you won't actually see a profit (you'll be working to pay for your new gear).
So if you will be doing small parties, a small neat rig will be better for you. Lots of a deals with DJ's selling up or upgrading, so 2nd hand is a good consideration.

Its also worth considering Kids parties - these can be pretty lucrative (if you don't mind kids!), and combining a kids party in an afternoon with an Adult Party can really provide good income, for about 8hrs work (but physically harder with 2 set-ups/pack downs).

Also have a word with your local Chambers of Commerce, a lot of these offer new start up businesses the opportunity of a years worth of free advice on aspects like Accountancy, Marketing, Advertising, Tax Avoidance (not evasion) etc you will often also be offered a business mentor for a period in order to guide you through the tricky financial stuff and explain self assessment, book-keeping etc ,1-1.

Business Link also offers similar services and lots of advice, why not take advantage of both?.

Full time Dj's are always going to be slightly better off tax-wise as they can earn £6474 from their Djing / self employment activities before becoming liable for tax (you still have to keep accurate accounts though), whilst for those in a full time job, their £6474 allowance is often used up on their PAYE, so they become fully liable for paying tax from the first £0.01 profit they make on their additional occupation(s). Its important to remember that the personal allowance is an annual £6474 per PERSON and not PER occupation, a lot of people do confuse this.

Also bear in mind that if you use one vehicle for business and personal use then its highly advisable to keep mileage records to prove the % used for business and the % used for personal, you can of course claim a percentage against your fuel, insurance, maintenance etc of the vehicle against your tax expenses but the onus will always be on you to prove this, and so a little notebook with mileage records are a must, otherwise in the event of a tax investigation the revenue will often take the lower / average figure. If you use the vehicle more for pleasure than business, then it might be possible to just offset a 40p per mile allowance for the business aspect of its use, rather than working out %'s of everything. A decent accountant / business link will be able to advise you properly on this.

You will also need to make sure that your vehicle is insured for the correct business use - ie Mobile Disco. 90% of everyday insurers exclude anything to do with Radio, Hospitality and Entertainment in ALL of their policies, including the generic business level cover. So if you think that a general 'business' blanket cover will cover you for DJ'ing if the insurer states entertainment in their list of exclusions then you are effectively driving outside of your policy. If discovered, this is treated just the same and carries exactly the same penalties as driving with no insurance, which carries a mandatory 6 penalty points, a large fine and seizure of your vehicle, you will also have your existing policy cancelled by your insurer and will also be blacklisted on the M.I.D making it extremely difficult and expensive for you to obtain Motor insurance in your name in the future.

As you'll more than likely be working from home, you can also set aside some expenses out of your normal household bills and utlities, if you can prove that you have a room set aside as a 'home office'. Other costs like webhosting, a dedicated mobile phone for business use (helps to have a business contract / tariff to prove) can also be claimed as legitimate business expenditure, as well as printing, stationary, advertising etc. Again, this is where a good accountant should be able to legally save any profit making business, two or three times their annual fee, in tax.

Also use a seperate bank account for all of your business activities. This isn't a requirement by law, however it is highly recommended and prefered by the Revenue and will help to keep all of your personal and business activities seperate and will make it easier to tie up receipts and exenditure for your business with statements on the account.

All of this may seem frightening at first, but its largely common sense and better to know what is expected right at the start, rather than fall foul of it and run the risk of fines later on. Running your own business, even as sideline is always going to carry more responsibilities, paperwork and redtape than working in the employ of somebody else, where all of this is handled by somebody elsewhere and things like Tax and N.I are all done on your behalf.

Many thanks guys, there is some really helpful info in that lot. The whole thing is on ice at the minute as my wife is due to have our second child in the few weeks. However I want to do a lot of the ground work now so I can swing into action when ready. I will probably be looking to kick things off in the new year once the dust has settled a bit at home and I am getting more than 4 hours sleep a night!

Thanks again for your help. For the guy who asked where I am - I'm in the midlands.