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 Authors ‘Tax 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.