Income from Writing - Your Tax questions answered!

Hello guys,

I saw on a Seefacts thread that a few people were asking about income, tax, HMRC and generally not going to prison because NewsRevue have sent you a cheque for £23.50.

As well as attempting to write sitcoms, I am also a qualified accountant and specialise in personal tax advisory work. I have been in this field for ten years.

I am happy to answer general questions regarding the whole self assessment thing, being a sole trader or in a partnership and how to deal with HMRC.

So if you have any questions fire away....

Def.

I do not talk about tax!
Nasty little bastards in suits. Fook em.

I did a self assessment and my partner disagreed.

Go on then. If I earn £50 from writing for the first time. What should I do?

Dan

I'd declare it. Why not? You don't want hassle further down the line just for peanuts. Then you can sleep soundly in your bed at night.

Quote: swerytd @ April 30 2008, 9:29 AM BST

Go on then. If I earn £50 from writing for the first time. What should I do?

Dan

View original

Dan, it much depends on what your plans are. If this is a one off £50 then it can be considered as 'other income'. You would need to notify HMRC that you have recieved this as it is regarded as untaxed income. HMRC would most probably put this into your coding notice so that you pay tax monthly via PAYE (as you are employed I believe). You can have untaxed income of up to £2500 in a tax year and have it treated in this fashion.

If however, this £50 is just the beginning of your writing career and you expect to begin earning more than this (ie; that you are actively seeking writing income) then you will have to consider registering as self employed. This means completing a tax return and keeping accounts of your income and expenses.

This is a large subject and potentially I could write pages so I will try and answer specifics as they arise.

A few things to consider. The company that paid you the £50 will have claimed this as an expense. This means there is an audit trail that has your name on it. It is not unknown for HMRC, when they get the opportunity, to trace through invoice and payment records to see that the people it affects have declared the income.

Also be aware that HMRC may probably have someone checking this site to try and match up writers claiming income/success with their tax records. In fact HMRC have a dept who's workers job is to trawl internet sites for this very thing.

Def.

Deferenz, thanks for the offer of guidance.

I have a few thousand pounds of income from writing expected already this year, and HOPE it will be more. You mention setting yourself up as self-employed (which I was planning to do) but are there are more tax efficient vehicles available, bearing in mind my income will be low?

Also, is there a list somewhere on the Internet of expenses that you can offset against tax? I understand things about portions of costs if you work from home, travel, subsistence etc. but I was wondering about more obscure things.

For example, if I were to be writing some sketches about a golf club, could I legitimately offset the costs of trips to a golf club against tax? Under the guise of 'research'?

Cheers Def

Dan

Quote: Smithy @ April 30 2008, 12:29 PM BST

Deferenz, thanks for the offer of guidance.

I have a few thousand pounds of income from writing expected already this year, and HOPE it will be more. You mention setting yourself up as self-employed (which I was planning to do) but are there are more tax efficient vehicles available, bearing in mind my income will be low?

Also, is there a list somewhere on the Internet of expenses that you can offset against tax? I understand things about portions of costs if you work from home, travel, subsistence etc. but I was wondering about more obscure things.

For example, if I were to be writing some sketches about a golf club, could I legitimately offset the costs of trips to a golf club against tax? Under the guise of 'research'?

View original

If there is to be regular amounts of income then there needs to be a structured way for you to disclose this. For this there is a choice of self employment or a company. Self employment is the easiest to set up and keep going whereas a company is more involved and will generally need an accountant to assist you unless you are savvy with knowledge of the Companies Act, producing accounts and filling out numerous legal forms. This all costs £££ of professional fees naturally. Companies can be good vehicles for many reasons but require more work in setting up and running.

Self employment is fairly simple to set up. Ring your local tax office and tell them that you are getting income from writing and want to register as self employed. They will do the set up over the phone.

Hopefully, this link should take you to the HMRC business manual regarding various expenses -

http://www.hmrc.gov.uk/manuals/bimmanual/BIM40000.htm

The key to business expenses is that they have to be 'Wholly & Exlusively' for the trade. Oddly, Golf itself is a pet love of the HMRC and if they come across it they try to deem it a personal expense. You can thank fat cat business men for that who try to put all the golf membership through their accounts.

If you were genuinely writing some material on golf then I think it would be ok to include some expenses for a visit to a golf course for research. However if golf is a passtime of yours and you want to get tax relief on your course fees then if HMRC find out they would insist you pay the necessary tax. If they thought you were scheeming to put bogus expenses through though they could suggest it was Tax Evasion, which is punishable by death.

look, you just need to ring he tax office and they will advise

Nothing wrong with free advice, BB.

Especially as the tax office is the probably the last place to get advice on avoiding paying more tax than you need to.

What happens if "other income" starts becoming regular?

When do you have to start declaring?

With Newsrevue you just get a cheque - no paperwork.

Quote: SlagA @ April 30 2008, 6:37 PM BST

Especially as the tax office is the probably the last place to get advice on avoiding paying more tax than you need to.

View original

Actually - they're superb. Since self assessment started they have gotten far better at handling calls from the public. On issues like this where people are only earning a tiny amount a simple 5 min call would answer all your questions.

Quote: M Lewis @ May 1 2008, 9:24 AM BST

Actually - they're superb.

View original

I stand corrected.

Yeah the Inland Revenue chaps are cool but don't mess with the Vatman!

They will go biblical on your ass.