Tuesday 12 June 2012

Taxing Matters: things I wish I knew before publication

by Teri Terry
"But in this world nothing can be said to be certain, except death and taxes." Benjamin Franklin, 1789.
In my closet. Quick - shut the door!
Yesterday I went to one of the Society of AuthorsTax Talks for Authors’ run by Barry Kernon and Andrew Subramaniam, senior accountants in HW Fisher & Company's Authors and Journalists Team. Yes, that’s right: they have an actual team for authors! So they know what they are about. And for me it was definitely about time to stop avoiding the subject. To take a peek in the closet of financial fear, and face what scares me. 

Afterwards I felt a little like Linda Blair in the Exorcist: so much spinning around in my brain that my head might possibly fly off. Luckily there was a good sprinkle of Scoobies in attendance to de-stress with over lunch: fellow Slushie Candy Gourlay, who was reminded often enough to remember to go this year; Sarah McIntyre, who picked a very rainy, miserable day to go to the wrong venue across London and arrive soggy and late; Paula Harrison, Sue Eves and myself, as well as new writing pal Rachel Ward

Stuff I learned? 
Proviso: I am not any sort of tax genius. I may have got something wrong. Don’t rely on any of this, except possibly points no. 4 and 9. Seek advice. 
OK, here goes: 

1. This bit I already knew: once you are earning from your writing, you must register as self employed, and start paying NI contributions (class 2), currently £2.65/week – unless you earn less than a threshold (currently £5595). You can find out more about this here. It may be wise to pay class 2 even if you are under the threshold – to keep your record of NI contributions for getting state pension, and so you can get things like maternity allowance. You also have to pay NI class 4 contributions as a percentage of your taxable profits when you pay your income tax - more here. So whatever your tax bracket is, add this on top. Ouch.

2. It is a good idea to keep records of writing expenses before getting published. Oops. Once you are treating your writing as a business – evidenced by things like agent submissions etc – you can carry these forwards as losses for four whole years. Though possibly you should have been registered as self employed over these years to do so – you can do this after the fact, though may get knuckles rapped by NI for not paying or claiming an exemption from NI contributions. 

3. Failing no. 2, it is a very good idea to start keeping records once earning writing income. Oops. I’m hopeful my shoebox of receipts will magically organize themselves. And apparently Revenue rather like handwritten diary notes over computer ones: eg. entry on June 11: "train fare to London for Tax talk for Authors."

4. Local knowledge is important, particularly when it is raining very, very hard: Candy knows the secret ways, and should be followed.

5. You can’t claim costs of building a Writing Shack in your garden! SO unfair, that one.

If I don't look, it'll go away. Right?
6. It would be wise to consider voluntarily registering for VAT once you start earning, even though you don’t earn enough to have to do it. Oops. The numbers baffled me a bit on this one, but you can actually make a profit out of being registered. Plus if you have an agent you have to kiss goodbye the VAT on their commission if you’re not registered for VAT. In fact I’m pretty much convinced I should have done it, and still should: I’m just blocked by my fear of filling out even more forms.

7. Ignoring halls and bathrooms, if you have one room in your house set up as your writing space, you can claim household expenses like gas, electricity, council tax etc in proportion to the number of rooms in your house – eg. in a house with 5 rooms, you can claim 20% of these bills. Cool. But make sure there is a non-writing incidental use in the space – a birdcage, a tumble dryer, a record collection, you name it – or if you sell the house you may lose your capital gains exemption.

8. I’ll never get a full state pension, because I can’t fit in enough years of work (30) with NI contributions in the UK before hitting retirement age. Yet I still have to pay them. Bummer.

9. It is good to go out for lunch with Scoobie pals to recover after more than two hours of concentrating on tax; but it is bad to go for an all you can eat yummy Indian buffet when you already have a dodgy tummy. Really bad.

10. And, overall...? 
"The hardest thing to understand in this world is income taxes." Albert Einstein.
If he needed an accountant, then maybe, so do I.

24 comments :

  1. Oh man. It fills me full of terror. I've decided to go with a tax accountant who's local and does other authors/illustrators I know but I'm still struggling to send the form back that he's sent me. Why is it so terrifying?! I PROMISE to send the form back to him by the end of this week. And now I've told you I'll have to do it. I actually really believe in paying tax, but I wish it could be removed at source so I didn't have to work it out and remember things (and be organised, which I'm not). I'm hoping that with an accountant, some of the terror of it will go. And this is from someone who actively really LIKES maths and calculations. I can't think how horrible it must be for those who don't... Thanks for this, Teri.

    ReplyDelete
    Replies
    1. how about I'll nag you and you can nag me to sort ourselves out? LOL

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    2. OK. I've done it. I've booked an appointment in two weeks!

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  2. I'd been busily saving receipts in a shoe box for years in the vain hope they might come in useful. Then we moved last year and the box got thrown out. So now I only have a very few receipts for books, printer paper and cartridges. Does that mean I'll finally get the deal given I have virtually nothing to set against it? ;-)

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    Replies
    1. Mine is still there. But the horror! Though I've never been very thorough with what I keep - mostly just big stuff, like conferences.
      Look at it this way: less math to do?

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    2. Don't forget your bank statements - if you paid by cheque or card the payments will be recorded on there and that, as far as I understand, should be enough for your records because it is proof of payment. If you ordered stuff online, on Amazon for instance, you may be able to download receipts.

      Regarding sorting receipts. Organize them by month and then by type and it'll make it less daunting.

      I've been self employed for many years and used to be organized but then realised I could leave it until the last minute then do it all in one hit and prefer that way now! Though, be aware that some receipts fade over time.

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    3. That's my method, Amanda. Everything goes in this years folder in the filing cabinet then gets sorted when it needs sorting. It's fine doing it this way.
      And filling in your tax return online is much easier than filing in a paper one because it only shows you the pages you need for your accounts. Not all pages for all types of businesses.
      It's not as complicated as it seems. Just something to get used to doing.

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  3. This post makes me feel sick. It was the side I hated of being self employed. I think I might go in the corner and hide, rocking gently as I say 'No more forms...' Like Jeanette though, perhaps my fear will bring about that all elusive contract ;-)

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    1. actually I think my aversion to all this stuff has a similar source to you, Vanessa - in that I was self-employed (incorporated) in Australia, and I remember all the nightmares of sorting it out. I think I really should get an accountant....

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    2. Teri I was self employed in Australia for a while as well and am now self employed here.
      In both cases I recommend having an accountant. So much better for peace of mind! Also it is a motivation, my accountant is a lovely person and I feel that I have let him down personally if I don't keep on top of things. I never had that feeling when dealing with the tax department directly and they do seem to like to frighten people.
      My partner is also self-employed and very good with finances but he chooses to use an accountant for his taxes - again it is peace of mind but also because accountants come up with some good ideas about how to manage things for you.

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    3. I think you're right. I don't want to go through the pain I went through in Australia. My problem is I keep switching tax systems! I sort of had Canada figured out, then I sort of had Australia figured out. I just can't face doing it all again....!

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    4. Oh Teri you have my sympathy and admiration. I certainly could not face a third tax system let alone a fourth!

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  4. Blimey. My head hurts. I feel for you fab authors having to do the tax thingies! Good luck! take care
    x

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  5. Don't be scared of Vat! The vat office team are ( surprisingly) generally very helpful and an awful lot can be done on line http://www.hmrc.gov.uk/vat/index.htm

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  6. And even the tax department can be helpful. Before I had an accountant I mismanaged things one year and was able to sort out a series of payments for my tax bill when I couldn't pay it all in one go. They are ok if you ring them as soon as you can to let them know what is going on.

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  7. Good to meet you Teri. I like the description 'new writing pal'. You don't have to have an accountant. I've found that the basic tax form online is not too scary after you've done it once. You need to take it calmly and allow enough time. That said, the first year I had a go, it took 3 or 4 sessions and I sank crying onto the carpet twice. Second and third years were a relative doddle. Wish I'd known some of the stuff we learnt yesterday though...

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    Replies
    1. Note to self: must allow time for sinking, crying into the carpet.

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  8. Thanks for writing it up! Great to see you. :)

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  9. What a timely blog. I'm about to try and face my tax for the year. I'm self-employed and have done my own form for years now - with three different businesses (music, complementary therapist & landlord)! I have to admit, adding my writing revenue is scaring me at the moment. This will be the first year I've done it. I think I might find a friendly local accountant to go through everything with me and then cope on my own other years - it's how I've done it before. And I agree with Amanda, the tax department are very helpful when you call them. I've never had a problem they couldn't sort out - yet!

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  10. I handed my tax return over to an accountant on my publisher's advice when numbers looked like getting big due to a film option. So far (two years) I have not been asked to produce any receipts, just the spreadsheet on which I record my income and expenses.

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  11. Great write-up, Teri. It was good to be amongst fellow fearfuls, yesterday. Maureen - when you register for VAT, your returns can be due every 3 months. As you say it's good to get used to keeping records - but perhaps more than once a year!

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    1. Fellow fearfuls, what a good description!

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  12. I'm going to the talk next Monday! Glad to have a bit of preparation, so thanks for the info!

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  13. I've been self employed for more than 20 years, and the Inland Revenue forms still terrify me! I am one half of a Business Partnership, which makes tax things more complicated, so we have a fab accountant... but he is soon to retire. I will be lost and petrified without his assistance. And Partnership forms can't be done online... you HAVE TO fill out the paper versions! I still get sleepless nights... Form fobia - there must be a medical term for it!

    ReplyDelete

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