Child Actor and Tax: What You Need To Know

 

There seems to be a flurry of activity with children being on film sets both in the UK and overseas, and with that comes a lot of misconceptions about children and tax.

I did a blog post way back in 2016, and nothing has changed – well except the tax  allowance/ threshold – https://bit.ly/3qgo5bN

Children under 16 can earn up to £12570 and not have to pay UK income tax or national insurance, so in theory, HMRC is not interested in them as there will be no tax to pay.  When the child turns 16, then they will be liable for national insurance although how much depends on thresholds and the Government has implemented a slightly complicated route on this. That is subject to a different post.

Income Earned:

Income earned needs to go into the child’s bank account if they are able to get one, but most likely it will have to go into a trust account for when the child is treated as an adult. Their expenses for the work can come out of this account and it is the same as being a self-employed adult.

Withholding Tax:

All that is straightforward, but where you start to get problems is if the child has earned money overseas and had been deducted withholding tax. Some people believe they can get this money back from the UK Government via HMRC, and some people think they can get it back from the overseas Government. Good luck with the last bit.

If the child earns more than the income tax threshold and will therefore pay income tax, the overseas income tax can then be deducted from the UK income tax, but if the child has not earned enough, there is no offset available.

Let’s take the example that the child goes to Italy, and earns the equivalent of £2500. Italy deducts 40% withholding tax, so you lose £1000.  If the child earns less than £12570, then no deduction can be made.  If the child earns between £12570 and £50270, then only 20% of the fee can be deducted as foreign double tax relief as if earned in the UK, the child would only be paying 20% tax, not 40%, so can offset £500. The other £500 is lost.

You can always check out the situation with an in-country tax accountant and see if you can get anything back by submitting a local tax return, and check out their fees for doing so. You may find it costs more for a local accountant to do the work than the tax you get back.

Good luck, I hope that clears up some misconceptions.