Budget 2026 Update
You’ll find lots of Budget Updates in the press and on the internet but here we focus on some of the things that are most relevant for authors.
Trading allowance increasing to £3,000
From 6 April 2027, the trading allowance will increase from £1,000 to £3,000. This means individuals with qualifying trading income of up to £3,000 a year could receive it free of income tax. That’s income before expenses, rather than profit.
For authors working through a limited company, there could be a useful tax planning opportunity here.
Many authors earn money from several activities alongside their writing, such as school visits, editing or design work. If everything currently goes through your company, it may be worth arranging for some future work to be undertaken and invoiced personally as a sole trader instead.
For example, you could potentially receive £3,000 a year from school visits personally, covered by the trading allowance, while your publishing income continues through the company.
The arrangements need to be set up properly. Income must genuinely belong to you personally, and you can’t claim the allowance against fees paid to you by your own company. There’s also only one trading allowance across your qualifying personal activities, and it replaces a deduction for actual expenses.
It won’t suit everyone, but the larger allowance makes this worth a look. Speak to us before changing how you contract for or invoice the work.
Higher tax on savings and rental income
From 6 April 2027, tax rates on savings and rental income will rise to 24% for basic-rate taxpayers, 44% for higher-rate taxpayers and 49% for additional-rate taxpayers.
There’s a bit of history here. The current rates are 20%, 40% and 45%. Last year’s Budget announced increases to 22%, 42% and 47%, due to start in April 2027. Before those increases have even taken effect, this Budget has added another two percentage points.
So the overall increase compared with today’s rates is four percentage points.
For example, take a higher-rate taxpayer with £10,000 of taxable rental profit and £2,500 of savings interest. After their £500 personal savings allowance, £2,000 of interest is taxable.
Assuming all this income falls within the higher-rate band, and there’s no mortgage interest tax relief or other adjustment:
| Income | Tax at today’s 40% rate | Tax from April 2027 at 44% |
|---|---|---|
| Rental profit of £10,000 | £4,000 | £4,400 |
| Taxable savings interest of £2,000 | £800 | £880 |
| Total | £4,800 | £5,280 |
That’s £480 more tax each year, with no increase in income.
For authors, remember that interest on money set aside from an advance for a future tax bill can itself be taxable. Interest earned within an ISA remains tax-free, so it’s worth reviewing where you keep those savings.
The savings rates apply throughout the UK. The property rates above apply in England, Wales and Northern Ireland; Scottish rental income needs separate consideration.
VAT changes could increase authors’ advertising costs
If you’re an author spending money on advertising through overseas suppliers, a Budget change could increase your costs from 1 April 2027.
At present, many overseas business services are covered by the VAT reverse charge. If you aren’t VAT registered, the supplier generally doesn’t charge UK VAT, but you must count the value of these purchases when checking whether you need to register. That can trigger registration even if your own sales are below the VAT threshold.
From 1 April 2027, the reverse charge will apply only to VAT-registered businesses. Overseas suppliers will instead have to charge UK VAT on affected services supplied to businesses that aren’t registered.
For authors spending heavily on advertising through platforms such as Facebook or Amazon, this could make a noticeable difference. If you currently spend £10,000 a year on advertising supplied from overseas without UK VAT, adding 20% would increase your annual bill by £2,000.
Could registering for VAT help?
Potentially, yes. You can apply for voluntary VAT registration even if your turnover is below the compulsory registration threshold.
If you’re registered and entitled to recover VAT in full, the reverse charge normally has no net VAT cost. Registration could also allow you to reclaim VAT on other business expenses.
But we need to look at both sides. Registration may mean accounting for VAT on some of your income, and there’s the additional administration and cost of VAT returns.
If overseas advertising is a significant expense for you, it’s worth reviewing the figures before April 2027. Speak to us so we can work out whether registration would leave you better off.
Self-employed taxpayers face paying tax sooner
This point is more of a ‘heads up’ than a point requiring immediate action. The government plans to change when Self Assessment taxpayers pay their tax from April 2029.
If you make payments on account, you currently pay towards your tax bill in January and July. Under the new arrangements, you’ll make smaller, more frequent payments during the tax year in which you earn the income. Payments will be automated, for example by Direct Debit.
The direction of travel has been announced. The discussions now concern how the system will work, including payment dates, flexibility and the arrangements for moving across. More detail is expected in 2027.
This doesn’t increase the amount of tax you owe, but it brings payment forward. During the changeover, payments under the old system will overlap with those under the new one.
For example, assume your annual tax bill stays at £20,000 and your payments on account cover it in full. If the new system collected a full year’s estimated tax between April 2029 and March 2030, without transitional spreading, the payments could look like this:
| When | What the payment covers | Amount |
|---|---|---|
| January 2029 | First payment on account for 2028/29 | £10,000 |
| July 2029 | Second payment on account for 2028/29 | £10,000 |
| April 2029 to March 2030 | In-year payments for 2029/30 | £20,000 |
| Total | Two tax years | £40,000 |
That would mean paying two years’ tax over roughly 14 months, from the end of January 2029 to the end of March 2030.
This is an illustration, rather than a confirmed timetable. HMRC acknowledges the overlap, but the detailed transition arrangements are still being developed.
For authors receiving irregular advances and royalties, flexibility will matter as much as payment frequency. Smaller instalments won’t necessarily be easier if they fall due when little money is coming in.
There’s no immediate change to your payment dates, but this is something to build into longer-term cash planning.
Making Tax Digital: more authors included from April 2027
From 6 April 2027, Making Tax Digital for Income Tax extends to sole traders and landlords whose combined qualifying income was more than £30,000 in 2025/26, unless an exemption applies.
This is income before expenses, rather than profit. If you have both self-employment and rental income, they’re added together when checking the threshold.
Those affected will need to keep digital records and submit quarterly updates using compatible software, as well as completing their annual tax return.
Some breathing space on penalties
The Budget confirmed that people required to join MTD in April 2027 won’t receive late-submission penalty points for their first four quarterly updates, covering 2027/28. Similar protection already applies to quarterly updates for 2026/27.
That’s welcome, but it isn’t a year off from the requirements. You still need to keep digital records and submit the updates before you can complete your tax return. The concession doesn’t cover late filing of the annual return or late payment of tax.
What about the creative averaging exemption?
Authors who qualify for the creative averaging exemption can currently remain outside MTD for 2026/27.
There has been no announcement extending that exemption to 2027/28. HMRC’s published guidance still describes it as lasting until April 2027 and says those above the relevant income threshold will need to join from then.
We’re watching for further news, but we can’t assume the exemption will continue. For now, affected authors should plan on needing MTD from April 2027 unless HMRC announces otherwise.
If you’re a Writers Tax client, we’ll review how the rules apply to you and what you need to do.
This article provides general information based on the rules and announcements at the date of publication and is not a substitute for advice tailored to your circumstances.