---
title: Do I Pay Tax on a Grant or Bursary? A Guide for Creatives
description: Do creatives pay tax on grants and bursaries? This guide explains when funding is taxable, when it's not, and what HMRC expects you to report.
---

[blog](https://esxr.co.uk/blog)

# [Do I Pay Tax on a Grant or Bursary? A Guide for Creatives](https://esxr.co.uk/blog/do-i-pay-tax-on-a-grant-or-bursary-a-guide-for-creatives)

 Written by [Dean Shepherd CTA FMAAT, Chartered Tax Adviser, ~30 years experience](https://esxr.co.uk/blog/author/dean-shepherd) | Aug 1, 2025 8:04:07 AM

If you’re in the creative industries - whether that’s music, theatre, film, design, photography or online content - grants and bursaries can provide vital financial support. But there’s one thing many creatives aren’t sure about:

### **Do I need to pay tax on the money I’ve been awarded?**

The answer isn’t always straightforward. While many grants *are* taxable, some may fall outside the scope of tax depending on their purpose, how they’re awarded and your personal circumstances. Let’s unpack it.

 

### **Grants from Arts Council England (and similar bodies)**

This area deserves special attention.

Back in 1978, an agreement between the Arts Council of Great Britain and the Inland Revenue (now HMRC) established two categories of grants:

- **Category A (Taxable):** These are for **specific projects**, **commissions**, or **professional expenses**. If the money is to help you put on a show, create a body of work, or pay for business costs, it’s usually **taxable** as part of your trading income.

- **Category B (Non-taxable):** Known as **“buying time”** awards, these support the **development of your personal skills** without any direct link to a project. If you’re given time and space to grow as an artist without expected deliverables, this could be **non-taxable**.

⚠️ However, HMRC’s stance has evolved - particularly after the pandemic. Grants originally intended as personal development support were sometimes later deemed **taxable** because they effectively replaced lost revenue.

For example:  
**Arts Council England’s emergency COVID grants** were ultimately treated as **taxable income**, as HMRC viewed them as a substitute for trading profits.

 

### **What About Bursaries and Scholarships?**

Bursaries and scholarships *can* be exempt from tax *if* they meet the following conditions:

- You’re in **full-time education** (i.e. full-time instruction at a university, college, or similar institution)

- The award is not a reward for professional services or closely linked to your business activities

- The total amount **doesn’t exceed £15,480 per year**

Anything over that limit - or paid in connection with part-time study, creative commissions, or commercial work - may fall within the taxable net.

 

### **The Key Test: Is It Related to Your Profession?**

HMRC’s central principle is this:

> A grant or award is taxable if it arises *as an incident in the exercise of your profession or vocation*.

This doesn’t just apply to full-time creatives. If you’re a part-time musician, weekend artist, or occasional performer but the grant is linked to that activity, **it may still be taxable**.

 

### **How Do I Treat It in My Accounts?**

**If the grant is taxable:**

- **Sole traders** should include it in the “turnover” or “other business income” section of their Self Assessment return

- **Limited companies** should include it as income on the company’s Corporation Tax return

- Keep a clear paper trail of what the grant was for and how it was spent

**If the grant funded capital equipment:**

- The grant is **still taxable** as income

- You may be able to claim **capital allowances** for the equipment

- BUT: HMRC may reduce the asset’s cost for capital allowance purposes by the **amount of the grant** to prevent “double relief”

 

### **What About VAT?**

Most grants are **outside the scope of VAT** - you don’t charge VAT and you don’t reclaim VAT.

But there are exceptions. If the grant is **in exchange for a service or deliverable** (like a performance or report) HMRC may treat it as **consideration for a supply**, and VAT could apply if you’re VAT-registered.

This is a technical area - get advice if you’re unsure.

 

### **Examples Relevant to Creatives**

| **Scenario** | **Tax Treatment** |
| --- | --- |
| Arts Council grant to create a new theatre production | Taxable (Category A) |
| Bursary to develop your practice without any output | Possibly non-taxable (Category B), depending on terms |
| Grant during COVID to replace lost freelance income | Taxable |
| Funding to buy camera and lighting equipment | Taxable income + possible capital allowance (adjusted) |
| Scholarship to study full-time at drama school | Not taxable (up to £15,480 per year) |

 

### Final Thoughts

When it comes to grants and bursaries, the tax position depends on the *intention*, *context*, and *conditions* of the award. HMRC’s general view is that if the funding supports or replaces business income, it’s probably taxable.

That said, there *are* exemptions - particularly for full-time students or for awards genuinely aimed at personal development, rather than professional output.

To stay on the right side of the rules (and avoid surprises), take the time to:

- Review the terms of your award

- Keep good records

- Speak to a tax adviser familiar with the creative sector

 

### **Got a grant or bursary and unsure how to treat it?**

[Get in touch](https://esxr.co.uk/contact-us)- we’ll help you figure it out so you can focus on your creative endeavours.

[View full post](https://esxr.co.uk/blog/do-i-pay-tax-on-a-grant-or-bursary-a-guide-for-creatives)

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