Short Story Earnings and Tax

Vivacia

Hi all, I'm new to the forums and have been trying to find information about this from the Inland Revenue site but so far it doesn't seem to be able to answer my questions.

I'm aiming to make some extra money by writing short stories and (if I'm really lucky) get them published in anthologies and online magazines. These typically pay 5 cents a word, and I worked out it would be roughly £30 per story if they are accepted. I have a full time job already so this would be in addition to my full time income. Additionally I have plans to self-publish at some time in the future, which again would, all going well, give me a small income on top of the day job.

How does one go about declaring this to the taxman? I want to do this professionally and even publish longer works in the future so don't want to fall foul of them. How much do you / should you earn before you declare it (i.e. if I got one short published, make £30 on it, do I need to register for that)? How quickly should you register once you're earning? And how much would the tax be on extra earnings in general? (I'm thinking it's around 20% for small, regular amounts but I may be wrong)

Any assistance or advice to this wannabe writer is much appreciated.

Ypaymore

You need to register whatever your earnings. Whether you make a profit or a loss.

http://www.hmrc.gov.uk/selfemployed/register-selfemp.htm

The_Write_Girl

You will need to register regardless. A word of warning though - don't expect to make a shed load of money (I'm a journalist and also an author). Can I ask what your background is in writing? Do you have an MA or the equivalent in experience? Getting short stories accepted for publication can be difficult and even the most experienced of writers will find it hard.

Also, if you are serious about writing, I would NOT go down the self-publishing route. It's the Mickey Mouse of literature. I've seen so many cringe-worthy self-published efforts, I want to cry! You are best trying to secure an agent or publisher to be taken seriously.

Vivacia

Thanks Write Girl. I'm not expecting to make a lot of money with this (hence the full time job!) but have had some success already getting freelance articles and pieces published in the last year so I'm keen to give the story market a go. If you never try you never know!

I know what you mean about self-publishing - I read and research a lot of what's out there and see how awful so much of it is. I would only go down that route for works that wouldn't typically be accepted by an agent/publisher (like short story anthorlogies for instance) and would only do it if I felt that the finished product is polished enough and actually ready for publication.

I'm working on a novel at the moment to go down the traditional publishing path with, so I don't have all my eggs in one basket - the biggest mistake new authors seem to make.

I will wait until I have something successfully published and once/if that happens register with the Inland Revenue.

Thanks all!

tyllwyd

I don't think you should rush to register as self-employed unless you are confident that this will grow into a regular business for you. If this is just a hobby on top of your full time job it should be possible to declare this as casual earnings through self-assessment.

This is from one of martin's articles
"Casual earnings
Q. When do casual earnings make you self employed?

One-off freelance income and profits from isolated literary or artistic activities can go in section 13 of the Tax Return. There's a full list of examples of such income in the notes to the self assessment return.

If you are selling goods or services with any regularity or if it looks like a business – you are self employed. The official definition is “carrying on a trade, profession or vocation”. Then you have to register for National Insurance and tax and complete the self-employment pages of the return.

Where's the dividing line? I don't know, but I can't imagine anyone getting very excited if the income earned is well under the class 2 National Insurance small earnings exemption limit of £4,345 a year.

The main thing is that the Revenue and civil society expect you to join the tax-paying club, and there's no lower limit for that."

When it comes to tax, you pay tax on your total earnings plus any self-employed profit for the year - so if you are already in the 20% tax band, you will pay 20% on any additional earnings (until you hit the 40% threshold of course). I'm more vague about NI - the type of NI you will pay will depend on whether you register as self-employed or not (but if your self-employed earnings are low, I think you can register to be exempt for NI).

Whatever you do, make sure you keep a record of all money received and all your relevant expenses, so that you have everything recorded when it comes to filling out tax forms - if you do become self-employed, receipts for even silly little things like pens, paper, postage can add up when it comes to working out your expenses. It would be a good idea to open up a new bank account just for the money from your writing activities, so you can separate that out from your other income and daily living expenses.