The idea of ‘research tax credits’ always conjure up and image of science – whether that’s blindingly white laboratories or AI-driven software – both driving our future.
But authors drive our imagination and they too need research to help then understand the worlds they are describing – whether they be real worlds in need of investigation or fictional worlds in need of a context.
As an author, your thirst for knowledge fuels your stories but research is your lifeline, transporting you, and then the reader, to new worlds while uncovering hidden truths.
But what if that research could unearth not just narrative gems, but also tax relief treasures? In the UK, there are avenues for an author to turn research expenses into financial advantages.
Whether you’re a freelancer/sole trader or a Limited Liability Company (LLC) in the business of creating books, there are two main processes which can offer tax relief:
Income tax deductions for sole traders
You can deduct research costs, if directly applicable to your output as a writer, directly from your taxable income, minimising your tax bill. Eligible expenses might include travel, materials, equipment, professional fees, and even childcare (if it allows you to dedicate time to research).
But it’s crucial that you maintain meticulous records – receipts, invoices, clear descriptions – to support your claims.
Research and Development Expenditure Credit (RDEC):
It’s only LLCs which can tap into this scheme, and they can receive a 13% corporation tax credit on qualifying research beyond a minimum threshold. RDEC caters to projects seeking innovation, so you might want to think about developing new writing tools or exploring groundbreaking storytelling techniques. It’s a formal process, so you’ll need documentation to back yourself up, as well as a clear idea of what constitutes research. It’s more than a quick bit of Googling, your research must include criteria such as:
- Be novel: Uncover new knowledge not readily available.
- Advance your practice: Develop new forms of writing, storytelling techniques, or audience engagement methods.
- Hold uncertainty: Seek solutions to unknown problems, not simply confirm existing knowledge.
- Be planned: Follow a documented research plan with defined objectives and methods.
In practical terms, this might mean, obviously, any number of things: if you are writing an historical novel, then your research costs might include travel costs for visiting historical sites, archival fees, and or the purchase of specialised reference materials. For science fiction, you might claim expenses for scientific publications, software for world building, or consultations with experts in relevant fields.
For RDECs, the research must build skills and innovation that have a specific outcome and allow you to reinvest in your craft. But what constitutes key research in writing can be open to challenge, and is likely to need validation, so let’s have a chat and we can do some research of our own…
