Creative Averaging for Authors

Published by Louise Ford on

You may have heard about creative averaging for authors. The first question to ask is ‘why bother’?

The idea behind creative averaging is to recognise that writing a book might actually take some time. During the time you’re writing a book you aren’t earning any money from it. Once it’s published you might earn quite a bit of money all around the same time. Creative averaging allows you to spread the income across a couple of tax years and potentially pay less tax.

For example: an author earns nothing in the 2019/20 tax year and £25,000 in the 2020/21 tax year. Without creative averaging they’d pay no tax in 2019/20 and £4,053 in 2020/21. With creative averaging they’d pay no tax in either year.

It is always worth doing the sums to see if you qualify for creative averaging and to see if it would benefit you. It’s also worth getting advice on when you start your business so you don’t miss out on the chance to average as soon as you’re eligible.

There are more details on the HMRC site here.

Creative averaging can only be done by a sole trader and isn’t available for limited companies. There are other reasons for consider a limited company though – take a look at our Should a Writer set up a limited company guide.

Categories: Tax