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Do foreign entertainers and athletes pay withholding tax?

  • 3 min read
  • Last updated 15 Aug 2022

Withholding tax = tax evasion, right?

Wrong. Keep reading to learn exactly what it is and whether or not it’s classed as an expense.

An expense?

Yep. Listen up.

Did you know that foreign entertainers and athletes (and those who hire them) pay UK tax on performances/competitions that take place in the UK?

Whether you’re Lady Gaga, the next Rafael Nadal, or simply the person that hires them for a UK-based event, it’s important you know all about a little thing called withholding tax.

So what is withholding tax?

In the UK, if you pay foreign entertainers and/or sportspersons (who do not live in the UK) for a performance or appearance, you deduct income tax from their payment if the total amount exceeds their personal tax allowance threshold (£12,570 for 2022/23).

This is called withholding tax – a payment on account against the foreign entertainer or athlete’s final UK tax bill. It usually applies to the following:

  • Dividends (if they’re not paid by a UK company)
  • Interest
  • Royalties

If you pay the performer/athlete through a third party, you (the payer) are still responsible for deducting withholding tax. Before you make first payment, you also have to contact the Foreign Entertainers Unit (FEU) and register for withholding tax.

Withholding tax vs expanded withholding tax 💡

Ever come across the term ‘expanded withholding tax’ and wondered whether it’s relevant to you?

Expanded withholding tax is a type of tax prescribed on income payments in the Philippines – not in the UK. So unless you have an income source from the Philippines, then no, this term does not apply to you or the UK definition of withholding tax.

Who might qualify for withholding tax?

The types of entertainers and sports people that should have withholding tax deducted include:

  • Athletes
  • Actors
  • Musicians
  • Dancers
  • Models
  • Footballers
  • Motorcycle riders
  • Tennis players
  • Boxers
  • Singers
  • Sports pundits
  • Cricketers
  • Cyclists (track and road)
  • TV personalities
  • Variety entertainers
  • Darts players
  • Golfers
  • Jockeys
  • Choirs
  • Guest presenters
  • Motor racing drivers

For entertainers, they may appear individually or with others.

Withholding tax example 👇

Let’s say you’re a promoter for the music festival Glastonbury. You agree to book the Canadian rapper Drake to perform for a fee of £40,000 (bargain!). Because £40,000 exceeds Drake’s UK personal allowance, you need to withhold the basic rate tax (20%) from the payment.

For most payments over the personal allowance, you (the payer) should deduct tax at the UK basic rate of Income Tax.” 

HMRC

That means that from the agreed £40,000:

  • You pay £32,000 to Drake
  • £8,000 (20%) goes to HMRC as withholding tax

If you know in advance that you’ll make more payments to the athlete/entertainer which exceed the personal allowance, you deduct tax from the first payment – even if the personal allowance hasn’t been reached.

When does withholding tax not apply?

There are a few instances in which you (the payer) do not have to deduct withholding tax. These include:

  • If the total of all payments you make to the entertainer/athlete in that tax year do not exceed the personal allowance threshold
  • It’s a cancellation fee
  • The athlete/performer is an employee who pays tax through PAYE in the UK
  • You pay other people for supporting services such as venue or equipment hire, ticketing, security or catering
  • The payments are made to models at still photo shoots
  • You pay catwalk models at an event not open to the public (even if it’s filmed or streamed)
  • Payments made directly to film directors, cameramen or technicians

What if the entertainer/athlete’s UK performance income exceeds £50k?

If the entertainer or sportsperson has a UK performance income in excess of the basic tax rate band (£50,270 for 2022/23), withholding tax might not be enough to cover their tax liability. Instead, HMRC might require them to file and complete a self assessment tax return to pay their share of tax, which TaxScouts can help with!

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