In addition to being the accurate method of declaring your income, it’s important to note that reporting your income after deductions can potentially trigger an enquiry by HMRC. This is because HMRC may have received a declaration from publishers or literary agents indicating the full income amount.
It’s essential to be aware of other common omissions as well. For instance, outstanding student loans and child benefit should not be overlooked, especially if either spouse or partner earns over £50,000 annually. Considering these factors and ensuring their inclusion in your tax declaration can help maintain compliance with HMRC regulations and avoid any potential issues or enquiries.
To help clear up some of the common questions and issues authors face, we have compiled a list of FAQs and provided answers to them.
Q: Why should I show income after deductions on my tax declaration as an author?
A: Apart from being the technically correct way of making your declaration, showing the income after deductions may lead to an enquiry by HMRC, as they will have received a declaration from publishers or literary agents showing the full figure.
Q: What tax issues cause the most confusion for authors?
A: The income tax payments on account system can be tricky, especially for authors early in their careers. Many authors are surprised to learn that a payment of 50% is due on 31 January following the year of assessment, and another 50% payment is due on 31 July. Applications can be made to reduce payments on account when it is known that income is falling. Authors’ averaging of profits can also be confusing. Averaging does not spread tax liabilities forwards or backwards; it simply reduces the tax payable in the second of two adjoining tax years based on the average profits.
Q: What expenses do authors often forget to claim?
A: The most common omission or understated claim is the use of home as an office. If a room is furnished as an office, a claim for running costs can be made for 365 days a year. Expenses claimed can include rent or mortgage interest, council tax, buildings insurance, repairs and decorating, service charges, light heat and power. If a room is furnished as an office but not in constant use, light heat and power costs should be restricted to actual usage.
Q: When I receive royalties via an agent, do I pay tax on the whole amount received from the publisher, or just what comes through after the agent’s commission?
A: The tax liability is on the net payment after deduction of the commission.
Q: When does HMRC require a detailed expenses claim?
A: A detailed expenses claim is only required if your turnover is above the VAT registration limit, which is currently £85,000 per year. It is advisable to keep a full record of expenses so that you can provide the necessary information in case of any HMRC enquiries.
These FAQs provide a glimpse into some of the common tax-related issues authors face. At DSC Metropolitan, we have a team of experienced professionals who can help authors navigate the complexities of the tax system and ensure compliance while maximizing tax benefits. Whether it’s advising on deductions, explaining tax obligations, assisting with tax planning, or providing guidance on international tax matters, we can offer personalized solutions tailored to your specific needs.
By working with us, authors can gain peace of mind knowing that their tax affairs are in capable hands. We stay up to date with the latest tax regulations and provide proactive advice to help authors optimize their financial situation. Our goal is to minimize tax liabilities, maximize deductions, and ensure authors can focus on their creative endeavours.
If you’re an author seeking reliable and expert tax guidance, contact DSC Metropolitan. Let us assist you in managing your tax obligations, optimizing your financial position, and ensuring compliance with the ever-changing tax landscape. With our support, you can navigate the complexities of taxation with confidence and focus on what you do best—writing compelling stories that captivate readers worldwide.
