Organising your Taxes as a Professional Athlete
A moment you’ll never forget as a professional athlete is the day you sign your first contract. After all the hard work that got you here, now you are being paid to do what you love – literally living the dream.
But with a salary, comes tax. Anyone earning over a certain amount (£12,500 at the time of writing) has to pay tax on the money they earn. For most, this is fairly simple calculation, done by taking a percentage of their salary. But as a professional athlete, you may well have a number of different ways of making money, which can make your tax affairs a little more complicated.
Getting the Right Advice
Because ‘sportsman or woman’ is a fairly unique job title, many accountants will not have had experience in helping athletes with their tax affairs. With the taxes of a professional athlete being more complicated than most, it’s really important that you work with an accountant with detailed knowledge in your field. You can find a carefully curated list of such professionals on the Play-Ex platform, here. A good accountant will not only make sure that you are not breaking any tax laws by accident, but they can also help save you money as well.
And while we can’t provide tax advice, we did want to highlight some of the different ways of making money that you might have as a professional athlete, and how these might be dealt with by your tax professional.
If you sign for a club or an organisation, you will generally receive a salary, just as you would in any other job. This should be the simplest for your tax professional to deal with, as the salary is a set amount, agreed between you and your employer.
Some athletes’ contracts have performance bonuses written into them. For example, if a footballer plays a certain number of games, or scores a certain number of goals, they may receive extra money. Your tax professional needs to be aware of any such clauses in your contract, and whether these targets have been met, in order that they can plan your tax correctly.
Sponsorships, Endorsements and Appearance Fees
As a professional athlete, there are a number of other ways you might make money as well as just playing your sport. Companies may want to sponsor you to endorse their products (especially popular in the age of Instagram and other social media). You may also earn money by making appearances, such as talking at events or turning on Christmas lights. All of these are additional income, and your accountant needs to know the details of all agreements you have with various companies.
Image rights are the control that you have over how your image is used. For example, if a sports drink wanted to use your face to promote their product, they would have to get your permission, and pay an appropriate amount. You may have heard that image rights can be an effective way to pay less tax. While it is true that some image holding companies pay less in tax due to being based offshore, image rights are not a ‘loophole’ (way to avoid paying tax). The tax authorities will make sure that you are only receiving money that is appropriate to the value of your image. This can be complicated, and it’s one of the reasons why working with a tax professional with experience in your field is so important.
One final consideration for your accountant is whether you receive any money in other countries. For example, as a professional tennis player you may play in tournaments all over the world. There are a number of different ways that this tax might be organised, depending on your own nationality, where you live and more. Your tax professional will be able to help organise this to make sure you are paying the correct tax on any overseas income.
As a professional athlete, your tax affairs are likely to be more complicated than the average person’s. For this reason it is essential that you work with an accountant who has experience dealing with the kind of tax arrangements you may have to make. At Play-Ex we understand that it can be difficult for professional athletes to access the services they need to organise everything from insurance and living arrangements, to tax affairs and employment contracts. We have built the Play-Ex platform as a place for you to connect with trusted, experienced services to help organise your life. Sign up to Play-Ex today and find the tax advice you need in four simple steps.
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