Paying Tax as an Escort

As with any self employed business, it’s a really good habit to keep on top of your finances while working as an escort. This may sound daunting, but it’s much less stressful when you are organised. I’m going to talk through tips and advice on where to start and how to get your admin in order, along with useful links and online services that may help you.

Who needs to complete a tax return?

If you earn more than £1000 of income in a tax year as a sole trader or partner, you will
need to complete a tax return. This is before taking off anything you can claim tax relief on (more on expenses later).

Useful link: https://www.gov.uk/self-assessment-tax-returns/who-must-send-a-tax-return

Tax Years and Deadlines

The tax year runs from the 6th April to the 5th April (inclusive) each and every year. Most of us submit our returns online rather than by paper, and the deadline for this is 31st January. So for the 2019-2020 tax year, you have up to the 31st January 2021 to submit your tax return. For the year we’re working in now – 6th April 2020 – 5th April 2021 – the deadline is 31st January 2022. This is the final final deadline. It is also the deadline by which the tax due must be paid. To avoid any nasty surprises, I would advise you submit your return as early as possible and to give yourself plenty of time to pay before the due date.

Useful link: https://www.gov.uk/self-assessment-tax-returns/deadlines

Setting up a Business Bank Account

I recommend you keep a separate business bank account purely for your sex work business: for clients to pay bank transfers into, for you to pay any cash income into, and for you to pay for your expenses such as travel, etc from. By keeping a separate account, life will be much easier when it comes to filling out your tax return and keeping a record of your accounts solely attributable to this business.

In order to set up a business bank account you will need to be registered with HMRC for self-assessment and will need your UTR number. This number is assigned to you once you have registered online (steps further down).

The business bank account I have found most simple to set up and use is with Tide: https://www.tide.co.uk (not a clicky link on purpose).

Tide offer great advice on setting up your own business as well as linking expenses and invoices. Their banking app is simple to use on your mobile. Tide have partnered up with the Post Office and PayPoint, so you can deposit cash at over 40,000 UK locations. However, it’s worth mentioning a small fee is charged: £1 fee for deposits at the Post Office and a 3% fee on the total for PayPoint.

Wherever you apply for your business bank account, be economical with the truth when it comes to the nature of your business. Say something like: personal fitness, beauty therapist, consultancy work or massage therapist. While sex work is not illegal in the UK, all banks including Tide will not deal with you if they find out the true nature of your business.

Another important point is to make your business name (and therefore you bank account name) something non-descript and, if you can, somewhat masculine. Something that could blend into a man’s bank statement without issue.

Setting Yourself up for Self-Assessment

HMRC will need the following personal information:

• Your national insurance number (can be found on a previous payslip)
• Government Gateway login – if you don’t have one, creating one will be the first step
• Unique Tax Reference (UTR) – again if you don’t have one, it will be created and posted to you during this initial sign up process.

Register online at https://www.gov.uk/log-in-register-hmrc-online-services

After you register, you’ll need to create a new self-assessment account. You’ll receive an activation code in the post within 7 working days, and once you have that you can sign in, complete and electronically send your tax return.

Being Organised

Being organised with your income/expenditure will lower your stress levels, especially if you find yourself worrying about money often. Money (or lack of it) is one of the biggest causes of stress and can lead to severe depression and anxiety. Being organised with your admin will help you immensely, and I recommend you try to keep up-to-date throughout the year. Schedule in your diary at least once a fortnight or every month to update your records, spreadsheets or any accounting software you might use and keep a filing system that works for you.

Paper Filing System

Get a leaver arch file, folder dividers and poly pockets. Use a divider for each tax year to keep
things separate. Or keep a divider for expenses and one for Income. You can write on your receipts any info that might be helpful to jog your memory when it comes to looking back at your costs.

Any information you receive/receipts you think to be relevant to your taxes, file straight away within your tax folder. So if you receive your P60, don’t stuff it in a draw and think I’ll deal with it later. File it straight away in your ‘TAX 2020/21’ section of your leaver arch folder, and remember to keep these records for at least five years. If you receive any documents, emails or receipts for any expenses online, you’ll need to print it off and file along with all your other tax documentation.

Online Filing System (recommended)

I recommend using Drop Box or Google drive. Name your folder something like ‘Tax 2019/2020′, and every time you receive a piece of information you think is relevant for that tax year you need to upload it to that folder online. Take a moment to name your file so you know what it relates to. For example: 2019.09.11-train-ticket-£40 – I always find labelling documents in date order first useful.

If you are given a paper copy, you still want to upload it. You don’t want paper AND online filing mixed. Scan your paper copy or use your mobile phone to take a photo and upload to your online filing system.

If you receive an email, you can screen shot it or download it as a document and save it to your drop box/google drive. There are ways without too much tech to get everything saved in one place so that when you come to do your tax return, stress factor is low, organisation is high. Whatever works best for you but try to keep consistent.

Income and Expenses

The easiest way to complete your tax return is to use the simplified Cash Basis unless you are earning over £150,000 a year. When it comes to filling in your tax return, add up your income and enter it in the income box, then add up your expenditure and add that to the expenditure box. The tax return deducts your expenses from your income and calculates your taxable profit and tax due. Other factors like pensions and charitable donations may be relevant, but in your first year you’ll probably not have to worry about these.

Income

Income includes:

• Cash paid into your bank
• Money transferred into your bank from a client
• Money received from virtual, online or phone services you provide.

If you are offering online virtual services such as onlyfans, private photo subscriptions, phone chat/sexting services and you are receiving money from these sources, it’s classed as income and should be recorded in your total income figure for the tax year. 

Reclaimable Expenses 

Did you know you can deduct your Honey Birdette or Agent Provocateur lingerie from your taxable income? Yes! As long as the expense is used wholly and exclusively for your business then it is classed as an allowable expense deducted from your tax bill.  Remember you must keep copies of your receipts. You don’t need to submit these with your return, but you must be able to produce them to justify your expense should HMRC query it.  

Business expense examples that may be relevant to you: 

• Condoms, latex gloves, lube, baby oil, Beppy sponge tampons, wet wipes, towels, mouthwash.
• Sex toys including; dildos, vibrators, paddles, whips, cuffs, clamps, kegel balls and strap-ons. 
• Lingerie sets, latex, stockings, hold-ups, stripper heels & role play costumes.
• Trains, taxis, FMTY flights and transfers, car parking, mileage* and reasonable travel subsistence e.g Starbucks, bottle of water, Itsu/Leon, sandwiches overnight meal in a hotel.
• Marketing subscriptions, photoshoots (including travel to/from), website admin and accountancy fees. 
• Mobile phone & Internet bill – the portion of which you use for this business.
• Beauty supplies – keep a make-up & wash bag separate for your business use only

Some travel expenses such as parking fees and the odd coffee here or there might not seem like a lot, but if you’re a busy girl and doing a lot of travelling this will all add up, so keep tabs as you might be surprised how much tax you could save!

Keep your email confirmations, tickets and receipts for all these expenses and set a reminder to send copies to your google drive tax folder.

On mileage: you can claim 45p per mile for the first 10,000 miles per tax year. It might seem time consuming to record, but I find it useful to keep the postcode noted on the booking in my phone calendar, then google maps it and find out the miles when I’m home catching up on monthly admin. Record all info in a spreadsheet, in your tax folder/drive, that you can refer to when preparing your tax return.

On entertaining: this shouldn’t be classed as an expense. If you are taking the client out for a Michelin star meal then there’s something very wrong! However, if you are providing a room for an incall then you can re-charge that cost back to the client if this is part of your agreement.  In which case, it would be classed as an allowable business expense.

On beauty treatments and cosmetic surgery: I am afraid these are off the list. There have been court cases over erotic dancers claiming their breasts implants as a deductible business expense. The court will most likely decline unless the surgery is a condition of your employment.

For more information and guidance on allowable expenses see the government website: https://www.gov.uk/expenses-if-youre-self-employed

A Final Word on Submitting Your Return

When it comes to filling out your return online, don’t panic! The GOV.UK website is really user friendly and there are lots of helpful links. So if you don’t understand a question, you can expand the page and the website will explain or give examples in more detail. If you are still unsure about any part of your return you can save it as you go along and come back to it another time. It’s not final until you actually submit the return. So even after you get the results of your tax calculation, you can still go back and make changes before you submit it if you need to. 

Thinking About the Future

It’s very easy to get caught up in the glitz and glam of this industry. Seeing girls posting about their Louboutin shoes, Chanel handbags and expensive dinner dates with their girlfriends. Be mindful that a lot of this is for show. Only spend what you are able, once money towards your tax/savings is put away.

I recommend saving 25-30% of your income to pay HMRC when payments fall due. A good idea is to keep these savings in a cash ISA. Transfer this part of your income straight into your ISA/tax savings account as soon as you can so you can forget about it and know you have peace of mind.

Have a long term goal. Many girls aim to live debt free and that is a great place to be. Pay any debt off before you start to save, as you will save far more on the interest you’d be paying to the banks and loan companies before getting much interest back from your savings! Use your first year or two to pay off any outstanding loans or bad debt. 

How much do you want to save for the future? You may want to save for a deposit on an apartment. Or even retirement. Lets face it, it’s unlikely we’re going to be offering sex work in our 60-70’s. It would be nice to retire early if we can, right? Putting money away in a pension is great way of qualifying for tax relief. 

A Lifetime ISA (LISA) is another great way of saving for your future. You can save up to £4,000 a tax year and earn up to a £1,000 bonus, as the government will pay you 25% on top of what you save. Although there are conditions that come with this type of ISA, it’s worth considering for your future finances.

Bear in mind you can save just a few £ a month if you want to. It doesn’t have to be much. If you get into a habit of putting away £20-£50 a month, over 10 years you would have saved £2,400 / £6000 + a £600 /£1,500 bonus, and that’s before interest or growth! Plus it’s tax free savings so the tax man can’t get his hands on any interest you make.

 For more information visit the money savings expert, Martin Lewis. I find him really helpful: https://www.moneysavingexpert.com/savings/lifetime-isas/

Just remember to think long term, as this kind of work might only be for a few years and unexpected things happen as I’m sure you’re all very well aware. And while demand for Oxford escorts and those in other areas may be high now, come a recession it may dwindle.

In Summary

Register with HMRC then set up your busines bank account.

Start organising your work and find a system that works for you.

Income and expenses.

Become debt free.

Think about your future.

I hope by reading this article I have helped you in some way. Whether that’s advice on setting up if you’re new to the industry and going self-employed, being more organised going forward, or planning for your future and long term goals. 

The Indie Collective team and I would like to wish you all a prosperous and happy 2021!

Lottie xx