Basic tax allowance

The basic tax allowance is the amount of annual taxable income on which no income tax is charged because it is intended to secure the tax subsistence minimum. It is increased regularly and is therefore not stated here as a figure. For beginners with only a few shooting days per year, it is the most important figure in tax law.

What falls under the allowance

The allowance applies to taxable income, not to the total of the fees. All types of income earned during a year are added together: wages from a side job, profits from self-employed shoots, income from a fan platform and other income. Operating expenses, income-related expenses, special expenses and other deductions are subtracted from this amount. Only what remains is compared with the basic tax allowance.

If taxable income is below this amount, no income tax is due. If it is higher, only the excess amount is taxed, initially at a low rate that increases with income.

Tax-free does not mean exempt from reporting

A common misconception is that anyone who remains below the allowance does not have to do anything. If you work as a self-employed performer, you must still register the activity with the tax office and will receive a tax number. Depending on the circumstances, you may be required to file a tax return, for example if you earn ancillary income above a small threshold in addition to employment income. Even if you are not required to file, submitting a return may be worthwhile because any excess wage tax withheld will be refunded.

What the basic tax allowance does not cover

• Value-added tax: This is a separate tax with its own rules. Whether it applies is determined by the small-business scheme, not by the basic tax allowance.
• Trade tax: It has its own allowance and applies only to commercial activities.
• Social benefits: Federal Training Assistance Act (BAföG), family health insurance and citizen’s benefit have their own thresholds, which are usually considerably lower.

Why the payment date matters

For cash-basis accounting, what matters is when the money actually changes hands. A fee for a shoot in December that is not transferred until January generally belongs to the new year for tax purposes. Expenses are likewise deducted in the year in which you pay them. This can help distribute income more evenly across two years and make use of the basic tax allowance in both years. However, this can only be arranged within limits: regularly recurring payments around the turn of the year are subject to their own rules, and the tax office will not recognize an artificial postponement without a valid reason.

Keep track of things

From the outset, keep a simple record of all income and expenses, as required for cash-basis accounting. This way, you always know how far you are from the allowance. If your income is close to the threshold, it is worth setting aside money for taxes and, if applicable, advance payments that the tax office may determine after issuing the first assessment notice.

The article Self-employed work, business and taxes provides an overview of business registration, tax numbers and levies. If you are unsure, consult a tax adviser or an income tax assistance association, insofar as it is responsible for your types of income.