Tax Deductions For Writers
There are two reasons why it’s important to understand tax deductions for writers:
- Claiming for the right things will reduce your tax bill.
- Claiming for the wrong things could land you in trouble with the tax man.
What does “tax deductible” mean?
If you incur an expense that is “tax deductible” then it means you can deduct the amount you’ve spent from your income before calculating your tax bill.
For example: An author earns £1,000 and spends £100 on stationery. The £100 is tax deductible. If they pay tax at 20% then they will save 20% x £100 = £20.
Sometimes people make the mistake of thinking that “tax deductible” means all the money they spend is deducted from their tax bill.
Tax Deductions for Writers. What can you claim?
Paying your accountant to prepare your accounts, VAT returns and tax returns
Paying an agent to find you publishing deals. A common mistake to make is to only include the net amount you receive from your agent in your accounts.
For example: An author earns £10,000 from a book advance. The agent pays them £900 after deducting their commission of £100. The correct way to show this is as income of £1,000 and an expense of £100. Netting the two figures off could cause you issues, particularly with VAT.
You may incur some expenditure researching a book you are writing. This could take many different forms. For example:
- traveling to locations in your book
- interviewing people
- reading other books, journals and magazines
- watching films, plays and TV shows on the subject
You do have to be particularly careful with claiming for any expense that the tax man might see as being for your own enjoyment rather than for the business.
You may have to spend some of your time (and money) taking people out for dinner. Unfortunately the tax man won’t let you claim this as a tax deduction – even if you’re entertaining someone you don’t like. That’s not to say you can’t entertain people and have your business pay the bill. It does mean that the cost won’t be taken into account in calculating your tax bill.
You may need to buy software to help with your writing. Scriptwriters may use specialist software like Final Draft while self publishing authors may wish to invest in software to detect plagiarism.
Editing and design costs
If you’re trying to get a publishing deal – or self publishing via platforms such as Amazon – then you’ll want your book to be as good as it can be. Costs you incur on professional editing and book cover design are all tax deductible.
There are lots of ways that you could promote your book including attending literary festivals. You do have to be careful to be able to prove what you spent was really a business cost. This would include meetinhs with publishers, book launches and book readings. Unfortunately if you just want to spend a few days sipping wine in the sunshine then it’s unlikely that HMRC will want to help you pay for your fun.
If you incur costs on professional subscriptions related to your writing then these would usually be allowable. Examples would include the Writers Guild of Great Britain, the Society of Authors, the National Union of Journalists.
Home as office
You have two choices for claiming for use of your home as your office.
The easiest way is to claim using HMRC approved simplified rates. How much you claim depends on the number of hours a month you work from home.
|Hours of business use per month||Flat rate per month|
|25 – 50||£10|
|51 – 100||£18|
Alternatively you can claim using actual costs of using your home. This requires you to keep records of money you’ve spent – on things like electricity, rent, Council Tax. Next you need to calculate how many rooms you have in your house and how many you use for business. Finally, you need to factor in the time you spend using the room for business. There’s no fixed formula for this but HMRC will expect you to be reasonable.