Writing a new chapter on tax efficiency for authors

Writing a new chapter on tax efficiency for authors Alex Robertson April 19, 2024

For authors, the joy of creation and publication can be dampened by the complexities of the UK tax system. Unlike salaried employees with clear-cut tax deductions, authors face a unique set of challenges when it comes to reporting their income and claiming allowable expenses. 

The first issue is the variety of possible incomes – which can lead, not surprisingly, to a variety of tax treatments. As an author, you might make your money from advances (the upfront payment from a publisher against future royalties); from the royalties themselves (a percentage of the selling price of each book sold, typically ranging from 5% to 15%. The specific rate can vary depending on the publisher, negotiation, and format (e.g., hardcover vs. paperback); and from subsidiary rights (income earned from selling additional rights to your work, such as film adaptations, translation rights, or audiobook adaptations).

And that’s just the ‘traditional’ book publishing business. If you’re self-publishing, your income could be from book sales via platforms like Amazon Kindle Direct Publishing (KDP) or Apple Books; from freelance writing for media companies or marketing content; or from public speaking, teaching or coaching writers or from Patreon or Substack-style subscriptions.

This variety of income, and the possible need to supplement it through completely different work, can cause problems with HMRC. The core issue lies in the definition of “business” for tax purposes. Unlike a typical business with a dedicated office and regular expenses, authors often work from home with irregular income streams. They may read books on their commute to Whitehall, but it can be strangely tricky to convince HMRC that writing is a legitimate business activity.

There’s a number of core issues in all this:

  • Mixed Income: Many authors have other sources of income alongside their writing earnings. This can complicate tax calculations and potentially affect eligibility for tax reliefs.
  • Fluctuating Income: Unlike a steady paycheque, author income can vary greatly depending on book sales, royalties, and freelance writing gigs. This makes budgeting and tax planning difficult.
  • Home office expenses: Claiming a portion of home office expenses, like internet or electricity, can be challenging. HMRC requires clear evidence that the space is used “wholly and exclusively” for business purposes.
  • Travel and research expenses: Travel for research or book promotion might not always be considered allowable expenses, especially if it involves personal elements.

The specific tax implications for authors depend on their income level and how they structure their work. Authors earning over £1,000 per year from writing must register for self-assessment and report their income and expenses annually. This requires meticulous record-keeping to document all relevant income and expenses. More established authors may choose to set up a limited company to manage their book sales and royalties. While offering potential tax benefits, this approach comes with additional administrative burdens.

It’s not all doom – keeping detailed records and getting tailored advice can help. We can help authors understand their tax obligations, maximise allowable deductions, and ensure compliance with HMRC regulations – while organisations like the Writers’ Guild of Great Britain or the Society of Authors offer resources and guidance on tax matters specific to authors, as well as campaign for greater clarity and fairness for those in the profession – notably better definitions of ‘business’ for authors, greater understanding of the nature of expenses for writers – and, a little more depressingly, better access to Universal Credit.

So get in touch, and let us simplify the plot for you.