In the digital age we live in, record labels and music streaming services are thriving like never before. But with this growth of the music industry has come an increase in the number of people registering their hobbies as record labels or music streaming service business ventures. The question is why? A hobby is a pastime, interest, or activity that you engage in for pleasure rather than profit. If your personal expense related to your proposed business venture (including registration fees) does not exceed £1,000 per annum (or pro-rata if less), it’s likely that your proposed venture meets the criteria of a hobby. So is listening to music a hobby? Read on to find out.
Is Listening To Music A Hobby?
Listening to music is not a hobby but a passion. There are people who listen to music just for the pleasure of hearing it, and there are those who listen to it as a type of therapy. Although both are good, one can be more beneficial than the other. Listening to music can be therapeutic because it helps you relax, and listening to relaxing music is beneficial for those who have anxiety issues. Some people may listen to music as an escape from reality by creating their own world through their favorite songs.
Record Label Or Music Streaming Service: Is It A Hobby Or Business?
- Who owns the recordings and/or music, and have the recordings been made for profit? If this is not a hobby, then it is likely to be a business.
- What type of music is being made? Is it the kind of music that you yourself enjoy listening to? If you enjoy listening to pop or rock music, then this is unlikely to be a hobby.
- What are the instruments being used? If you are using musical instruments such as guitars, drums, saxophones, etc., this is more likely to be a business than a hobby.
- Who is playing the instruments? Is it just one person or many people who are involved in creating the recordings and/or music? This will depend on what kind of instruments you use, but if there are multiple people involved in creating the recordings and/or music, then this will probably be more like a business than a hobby.
- How do they make money from producing their recordings and/or musical compositions? This will depend on what type of work they do on their recordings (e.g., if they sing or play guitar). If they sing or play guitar, but do not make any money from their performances (e.g., they perform for free), this will probably be more like a hobby rather than a business activity.
- Does your involvement in producing your recordings and/or musical compositions require outside investment (e.g., studio time) that would otherwise have been spent on more profitable investments (e.g., property)? If you spend money on studio time, this is likely to be more like a business than a hobby.
- Does your involvement in producing your recordings and/or musical compositions require outside expertise that would otherwise have been spent on more profitable investments (e.g., training in music composition)? If you spend money on expert advice, this is likely to be more like a business than a hobby.
- Do you make any profit from producing your recordings and/or musical compositions? If you make no profit from doing this, then it is more likely to be a hobby rather than a business activity.
- How much of the income from the recordings and/or music comes from selling CDs or downloading them? This will depend on whether or not they have been sold commercially, but if they have been sold commercially, then it is more likely to be a business than a hobby activity because there would now be an element of making a profit from the activity that was formerly done for pleasure alone.
- Is this activity something that could potentially generate income in the future? This will depend on what type of music you produce, but if your recording or composition could potentially generate income in the future (e.g., if it were to become popular), then this is likely to be a business rather than just a hobby activity that exists purely as an enjoyable pastime for its own sake (i.e., pure enjoyment).
- Is this activity something that could potentially generate income in the future? This will depend on what type of music you produce, but if your recording or composition could potentially generate income in the future (e.g., if it were to become popular), then this is likely to be a business rather than just a hobby activity that exists purely as an enjoyable pastime for its own sake (i.e., pure enjoyment).
- Do you have any other sources of income from producing your recordings and/or musical compositions? If you do, this will tend to make it more like a business activity than a hobby pastime activity.
When Is A Hobby Not A Hobby?
- If you are self-employed and your business generates profit from it, it is likely that your activity is a business.
- If you are a full-time student earning less than £11,850 per year (or pro-rata if less), you may be able to deduct losses from your hobby against other sources of income. For example, if you have a passion for music and record labels and make enough money from the music industry to pay for your university fees, you could turn your hobby into a business by starting up a record label or music streaming service.
- If the activity has been going on for more than one year (or 12 months in the case of self-employment), it is likely that it should be treated as a business rather than as a hobby.
- If your hobby is also a business, you may be able to deduct losses from it against other business profits.
- If you are self-employed and your business generates profit from it, it is likely that your activity is a business.
Conclusion
If you have a hobby that generates income, you can use it to reduce any income from other sources in the same tax year. If you have a hobby that does not generate income, then it is still a hobby and you should continue with your enjoyment of it as a hobby.