The Business of Writing: Volume 1: Business of Writing, #1

By Simon Whaley

What is a writer's responsibility when it comes to tax? What legal implications should writers be aware of? What records should writers maintain, and what's the best way of doing that? How do you cope with rejection or those crises of confidence that we all have from time to time? When is a pseudonym necessary? How can you improve your productivity? These, and many more, questions are answered in this collection of articles, first published in Writing Magazine.

More than 50 professional writers, some of whom have appeared on the bestseller lists in the UK, or the New York Times and USA Today, share their tips and advice for making the most of your writing business. 

Contributors include:
David Allen, Michael Allen, Judith Allnatt, Sarah Banham, Vicki Beeby, Louise Bolotin, Emily Bullock, Diana Cambridge, Alison Chisholm, Wendy Clarke, Marvin Close, Patsy Collins, Catherine Cooper, Nicholas Corder, Judith Cranswick, Dave Cullen, Nick Daws, Penny Ellis, Elaine Everest, Emma Finlayson-Palmer, Catherine Fitzsimons, Patrick Forsyth, Jean Fullerton, Della Galton, Alex Gazzola, Vanessa Gebbie, Vivien Hampshire, Solange Hando, David Hewson, Sally Jenkins, Sue Johnson, Susie Kearley, Jane Keightley, Natalie Kleinman, Yvonne Sarah Lewis, Kate Long, Anita Loughrey, Lorraine Mace, Adrian Magson, Kathleen McGurl, Eve Menezes-Cunningham, Tarja Moles, Christopher Owen, Joanna Penn, Diane Perry, Joanne Phillips, Julie Phillips, Kate Pool, Pat Posner, Jacqueline Pye, Sally Quilford, Jane Redfern-Jones, Suzanne Ruthven, Glynis Scrivens, Jane Smith, Jonathan Telfer, Paula Williams and Diane Wordsworth.

• Language: English
• Publisher: Simon Whaley
• Release date: Jan 11, 2017
• ISBN: 9798215483473

Simon Whaley

Simon Whaley is a writer, author and a photographer. Like many writers, he's had a few proper jobs along the way (high street bank, local government, civil service) but found that life as a writer suits him better. Since his first book hit the UK bestseller lists in December 2003, he's authored and contributed to several books, written hundreds of articles and seen several of his short stories published across the world. To find out more about Simon visit his website at www.simonwhaley.co.uk. To sign up to receive occasional newsletters visit: www.simonwhaley.co.uk/newsletter/

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1

Writing Shouldn’t Be Taxing

Congratulations! You’ve just sold your first piece of writing. Who do you tell first? Your family? Your friends? The tax man? Enjoy your moment of success, and then consider what this means.

As a paid writer, you need to start thinking about the business of freelance writing and, like all businesses, this means paying tax on your profits. If you haven’t already done so, register with HM Revenue & Customs (HMRC) online, or through your local tax office, as a self-employed writer. It doesn’t matter whether your writing is a part-time activity done in the evening after a day’s work or a full-time occupation, if you generate an income from it you need to tell the tax office. If you don’t, and the tax office later discover your undeclared earnings, you may be liable for a fine in addition to any unpaid tax.

If writing is a part-time activity, you can be employed and self-employed at the same time. Before I became a full-time writer, over ten years ago, I had a full-time day job and wrote in the evenings. I paid tax through PAYE (Pay As You Earn) on my employed earnings, and then HMRC sent me a tax return at the end of each financial year (5th April in the UK) to declare my writing earnings.

This is how many writers begin, but it can be intimidating. Chris Owen has just signed a contract with a publisher and is now in the process of registering as a self-employed writer. ‘The prospect of the financial side does seem daunting, but now the process has begun I realise there’s no going back.’

Jane Keightley, a travel writer who’s recently had success with Italia and Country Walking magazines, also has a couple of part-time jobs. ‘I shall do my own tax return until I start earning so much money it would become too complicated to do myself!’ she says.

For most, tackling a self-assessment tax return is relatively straightforward, however there are special tax rules that allow writers to offset the good years against the not-so-good years. After years of dealing with my own tax returns, when my first book spent several weeks on the UK bestseller lists I then turned to an accountant for help, because he understood these rules.

Vivien Hampshire, author of How To Crack Cryptic Crosswords (How To Books), had a day job and wrote short stories and articles in her spare time, for many years. (She’s since become a full-time writer, and her novel, How To Win Back Your Husband, is published by Harlequin HC.) ‘I registered as self-employed with the tax office as soon as I started earning from my writing, many years ago, and have done my own tax return alongside the PAYE one ever since. Amounts have never been huge and I do have a banking and accounts background so it doesn’t frighten me at all. The secret is keeping accurate and true records in case you get challenged or asked for proof - so far I never have been though. If the millions start to roll in, I may seek more professional help!’

Profits Are Taxed, Not Income

The good news is that you’re only taxed on your profits not your income, and you will only pay income tax if your writing profits and any other income you have are greater than your personal tax-free allowance. Everyone has a personal allowance, although the amount depends upon your individual circumstances. If you’re unsure of your allowance ask at your local tax office.

Not many of us enjoy filling out tax returns, but there are steps you can take to make life easier. Jane Keightley recommends being organised. ‘After helping my husband out with his tax return I realised how important it is to have all of your facts and figures easily accessible.’

To do this, set up folders: one for income and one for expenditure. File receipts in the expenditure folder and remittances in the income folder. I record all of my writing expenditure and income on a spreadsheet, which allows me to categorise it so I can work out how much I’ve spent on postage, computer consumables and travel, and how much I’ve earned from articles, books and short stories. But if you don’t like spreadsheets you don’t have to use them. ‘I keep a totally manual system,’ says Vivien, ‘a small notebook for each tax year, divided into two halves. Every little thing goes in the book - from a pack of envelopes to a useful book, membership of organisations and travel expenses.’

Anything you spend wholly connected with your writing business is classified as business expenditure. This includes stationery, subscriptions, travel, books and magazines for research, telephone calls and postage. The tax office can offer advice about how to apportion expenditure that isn’t purely business-related. For example, you probably use the Internet for business and personal use, so you could claim some of your Internet provider’s monthly charge to your writing business, but not all of it.

Keeping detailed records enables you to determine what your profit is. Your profit is what’s left after you’ve deducted any legitimate expenditure from your income. That’s why it’s important to keep detailed records. If your total writing income is £1,000 and your writing expenditure is £300, then your profit is £700 (£1000 income minus £300 expenditure). The current UK basic rate of income tax is 20%, which means your tax liability is 20% of your £700 profit (£140). If your other income puts you in a higher rate income tax bracket, then you’ll pay that higher tax rate on your writing income too.

Separate Bank Account

Another tip to keep things simple is to open a separate bank account for your writing income and expenditure. This stops any writing-related transactions getting mixed up with personal and other household finances. Consider opening an account with a different bank to the one where you keep your personal account. You’re less-likely to pick up the wrong paying-in book or cheque book if they have different logos on them.

I also opened a savings account and think of this as my ‘tax pot’. Every time I receive a payment for my writing I transfer 30% of it into this savings account. (Higher rate tax payers should transfer more.) That way, when HMRC send me my tax bill I know the money is already there! Vivien has done something similar. ‘Unlike PAYE,’ she says, ‘tax from self-employment does tend to be payable in big annual, or twice yearly, lump sums, not weekly or monthly - so you have to be sure it’s there when they ask for it!’

National Insurance

Why transfer 30% when the basic rate of tax is much lower? It’s because of National Insurance (NI). We also have to pay what are called Class 4 National Insurance contributions on any self-employed profits (the rate and earnings threshold of which are reviewed annually and subject to change ). Writers over pension age don’t pay National Insurance though.

In addition to Class 4 NI contributions, all self-employed people are liable for Class 2 NI contributions, which are a few pounds a week. However, if you think your writing income will be low you can apply for a Class 2 Small Earnings Exception. ‘I am also keeping a close eye on my net earnings as I may exceed the NI Class 2 limit,’ says Vivien. ‘Thankfully, I have always just skimmed under it before, but I am hoping my writing output and therefore earnings will go up now I have more time to write.’

In the UK, a new tax year starts on 6th April, and HMRC will send out letters to those registered as self-employed reminding us that we need to complete a tax return, declaring our profits earned during the previous tax year. So after 6th April, the tax office is interested to know about any writing profit generated between 6th April of the previous year and up to 5th April of this year. You can complete a tax return on paper, or online. For the UK’s HMRC, if you complete the paper forms you have until 31st October to return them. If you complete the information online (you need to be registered to do this, so allow time for this registration process) you have until 31st January to submit your information.

Kathleen McGurl, author of several time-slip novels, advises not to leave online returns until the last minute. ‘Don’t leave the tax return till January. Do it in the summer or autumn, and enjoy feeling smug while other writers are wringing their hands in despair in January.’

There are situations when writers should consider registering as self-employed before they’ve earned any money. Authors may incur travel and research expenditure for books, a year or more before their book is published and any income is received. This is still business expenditure that you may be able to offset against any of your other tax liabilities. The Society of Authors produces a useful Guide to Income Tax (free to members, small charge for non-members).

Don’t forget that being paid for your writing is not just about advances from publishers and payments from magazines. Income earned from self-published material, even if it is only in electronic format, such as on Amazon’s Kindle, or via the Smashwords platform, can generate a taxable profit.

There is lots of information available about tax returns and self-assessment on the HMRC website (See the Business Directory for useful links), and if you have any queries call the Self-Assessment Helpline (0300 200 3310). But don’t be frightened by it. Instead, think of paying tax as a success. After all, it proves you’re earning money, and making a profit, from your writing!

Business Directory

HM Revenue & Customs (www.hmrc.gov.uk) has lots of useful information online (they’re keen for you to pay tax, after all!). Check out:

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Information about being self-employed: http://www.hmrc.gov.uk/working/intro/selfemployed.htm

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Completing your self-assessment tax return: http://www.hmrc.gov.uk/sa/complete-self-emp.htm

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Current personal allowances and income tax rates: http://www.hmrc.gov.uk/rates/it.htm

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National Insurance rates: http://www.hmrc.gov.uk/rates/nic.htm

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National Insurance information: http://www.hmrc.gov.uk/ni/intro/basics.htm

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HMRC Guide to Record Keeping: http://www.hmrc.gov.uk/sa/rec-keep-self-emp.htm

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Society of Authors Useful Guides: http://www.societyofauthors.org/guides-and-articles

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Contributors’ Websites

Jane Keightley: http://www.janekeightley.net

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Kathleen McGurl: https://kathleenmcgurl.com

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Vivien Hampshire: http://vivienhampshire.blogspot.co.uk

2

Business Record Keeping

You don’t need a mathematics degree to be a writer, but it does have its uses. Author and journalist Alex Gazzola uses his to make effective use of formulae in the Excel spreadsheet he maintains to keep track of all his work. ‘I have an enormous, sprawling spreadsheet, which dates back to 1996,’ he says. ‘I have a sheet for articles, a sheet for regular columns, a sheet for reviews and other sheets for all of the different kinds of work I do or have done - news writing, books, tutoring, translation, awards administration, editing, critiquing, proofreading and so on.’ Who’d have thought being a writer entailed recording so much data?

As soon as we begin submitting work, whether it’s novels to agents, short stories or poems for competitions, or articles to magazines, it’s vital to keep track of everything. Every other business keeps tabs on its assets and data, and we must do the same. The business of writing requires us to know where our work is at any time, which pieces of work we’ve sold, to whom, which rights, and whether payment has been made. Even those writing for a hobby need this business-like approach. Many writing competition rules prevent us submitting work that has been previously published, placed in another competition, or submitted to another competition running at the same time.

Spreadsheets can help record all of this information. ‘I have columns for contacts, publication names, key dates, fees/rates, invoice numbers and much more,’ says Alex. ‘Connecting all these sheets is a network of calculations and linked cells which keep a running tally of important matters such as my income, my outstanding invoices, my most fruitful clients and upcoming deadlines.’

I use a database to hold my records, but only because I think spreadsheets are boring to look at. Each project in my database has a unique reference number. It’s eight digits long (I used to work in a bank, so I remember eight digit numbers) with the first four being the current year and the subsequent four digits increasing sequentially (20140001, 20140002 and so on). Each project has a Contact History section, recording the date and to whom I sent a piece of work, when the piece was accepted (or rejected), the date it was published, when I issued an invoice and the date it was paid. Any contact gets recorded. If editors acknowledge receipt of my submission I note this, which stops me inadvertently chasing them in the future. This system means I can see at a glance what’s happening with any of my projects.

If spreadsheets and databases are too complicated for you, don’t panic. Australian-based Glynis Scrivens writes short stories and articles and uses a combination of modern and traditional methods for keeping track of her work. ‘I find a mix of paper and computer-based systems works best for me. I buy a school exercise book at the beginning of each year, and write down everything I write, using a separate page for each piece. When I've written an article or story, I note the word count and list all the markets it might