This section is to explain how you, as an author, can obtain a tax refund. That is, get your tax back. This is not a guide for you to raid the Exchequer or to get anything to which you are not entitled. It is HM Revenue & Customs who owes the money here. And the money is owed to you.
If, like most authors, you are holding down a full-time or part-time job to supplement your income from writing, you will have suffered tax under PAYE. It is only a few of us that can afford to write full time, all of the time.
You and I, we work with words; we wrestle with the alligator called writing. We strive, fall short and strive again, hoping to say something meaningful, hoping to entertain — hoping to hit the big-time. In the process we incur costs. Our expenditure falls short of our writing income. We incur losses. They are tax losses. And our tax losses may be relieved against our other income, our employment income, generating a repayment of tax.
In short,once our writing losses are netting against our annual salary, HMRC will have taken too much tax under the PAYE system. So next we will identify those allowable deductions, which — once claimed — will reduce your tax liability and, in most cases, result in a tax repayment.
Finally, I would add that although this section is about securing tax refunds for authors, the same principles may be applied to minimising an author’s tax liability. Tax repayments generated result from each individual’s personal circumstances. Certainly if you (or your partner) have never paid tax you will not be getting any tax back. But even so, applying the following principles will help lower your present or future tax bills.
Let’s get started. You are a writer — a self-employed writer. That is, you run a business and the business is you. This is not a self-help gee-up. I am deadly serious. You are a writer running a writing business. That you may not be making much money is irrelevant. That your expenditure may exceed your income doesn’t matter. Your writing is not a hobby. The simple fact you are reading this is evidence that your writing is not a hobby. You are writing in anticipation of making money now or in the future. That is, in legal terminology, you are trading with a view to profit.
The tax legislation has specific provisions to assist new or struggling businesses that are trading with a view to profit. It allows losses to be offset against income from other sources. This is discussed in more detail elsewhere in this website. But for now, suffice it to say that when those losses are set off against earned income, a tax repayment is generated.
The key question therefore is what tax deductions as an author are you allowed to deduct?
I am going to tell you in the following sections, but first let me get one thing out of the way. It is obvious, but it nonetheless must be said out loud. In order for you to get a tax refund, you (or your partner) must have paid tax first, in most cases this will be under PAYE.
I do not do magic (whatever my clients may say!). There is no illusion involved here, no sleight of hand. I am not going to create a rabbit you can pull out of the hat in amazement in the form of a tax repayment. The rabbit must first be in the hat. The rabbit is the tax you have already paid. And we’re going to get it back.
Shortly after setting up my own chartered accountancy practice in 1988 I met with one of my first clients, a new author. He was a stooped, middle aged man, who was just beginning to enjoy a modest level of royalty income from his new novel.
In order to prepare his accounts I needed not only his income – which he could provide me with from royalty statements – but also an analysis of his allowable expenses. Unfortunately he had kept no records.
I knew I would have to work back though his bank and credit card statement, so I needed to know when he’d started on his book. I asked him, “How long were you working on your novel?” He looked at me with sad, hooded eyes and answered quietly, “All my life.”
All my life. That’s how long we research a book. The places we visit. The people we meet. The books we read. The music we listen to. The cars we drive. The planes, trains and coaches we travel on. Not to mention the heartache, the joy, the pain, the exhilaration and the loneliness. All our lives.
A lot of the expenses you incur as a writer are tax deductible. You get nothing for the agony and the ecstasy (nor would Michelangelo), but there is much you can claim for and I set these out in the following sections.
As an author your home is your office. Consequently, a proportion of your home expenses may be deducted from your income to arrive at your taxable profits or allowable losses. As to how much should be deducted, this is — to some extent — a matter of art.
If you write from a separate study in your home or, say, an outhouse at the bottom of the garden, it would be relatively easy to determine the amount of the expenses on, say a square metre basis.
However, increasingly we write wherever and whenever we can. The use of laptops, tablets even mobile phones makes it easy to write anywhere, either with the devices synched with each other, or with the use of the portable memory stick. (I keep mine on my key ring.) In these instances we may take a broad percentage of the aggregate household expenses based on time spent writing. This would include: gas, electricity, insurance, mortgage interest and repairs etc.
If you have a cleaner, there is no question that her or his costs are incurred in part for the business. I would go further. If the only reason you have a cleaner is so that you can spend your free time writing rather than cleaning, the cleaner’s entire expense is an allowable deduction. In short, you need the house to be clean. It is your writing environment. It is where you meet with other writers or agents or publicists or fans or whatever. It is important that the house is always spick and span.
Your novel should be edited. No, your novel must be edited – and initially by yourself perhaps, or by a friend or, at best, by a professional. The same applies to proofreading. The cost of this is an allowable deduction.
Obviously you cannot pay yourself and you must pay a professional. But what about a friend? Well, if the cost is to be tax deductible you clearly must pay them. Sometimes this is difficult with a friend because they may refuse payment on the basis of, “I am doing this as a friend, you don’t need to pay me!” But usually you do end up paying them one way or another — you buy them a present (ideally something you know they’ve had their eye on), or you take them for a meal in their favourite restaurant – or you do something else. In some way or another you return the favour.
The gift, the meal or the ‘something else’ will cost you. The cost of the present is tax deductible, the cost of the meal is not (see below). And the cost of the ‘something else’? Well, it depends on what it is. I say if your friend doesn’t want to be paid but you want to return the favour, give them a gift voucher and enter the cost in your records under ‘editing and proofreading expenses.’
This is an important expense and needs to be explained in more detail. Unusually though, let’s start from looking at the position of the recipient. Everyone, from the moment they are born, enjoys a personal allowance. That is the amount of money they can receive in income without falling in charge to any taxation. However any sum paid to such a person , though tax free in their hands, is nonetheless a tax allowable deduction for the payer. Now, let me turn the picture round again.
If, say, you paid your daughter (son, niece, nephew whoever) for secretarial, administrative or research services say £500 a month, you would deduct such payments from your income for tax purposes (reducing your profit or increasing your loss) but your daughter – provided she had no other taxable income – would suffer no tax at all. The same would apply, say, to your spouse.
Now beware of the guy in the pub who says “You can’t do that, it’s illegal.” I’ve heard him; you probably have too. He constantly spills his beer, he has lots to say and he’s usually wrong. He is seriously wrong here. Did you know that one quarter of government ministers currently have family members on their payroll? Nadine Dorries MP (no mean novelist herself) employs both her daughters, one as an administrator and the other as a secretary. I pass no political comment. I merely state that employing family members has a rich parliamentary tradition.
How does HMRC view such arrangements for the humble writer? Well, on the whole, in my experience, reasonably well. Such arrangements have been common fare for many years. However, if you are claiming loss relief generating a tax repayment, the tax inspector may decide to have a closer look. This is no cause for concern, but be prepared to address the following: the type of work undertaken, the number of hours worked, any evidence of the work undertaken and evidence of payment (if cash there should at least be evidence of sufficient cash being withdrawn from the bank out of which the payments were made).
Clearly the recipients of the payments must have the skills to undertake the work assigned to them. Toddlers, of course, can’t type. However virtually all children in secondary school can do secretarial and administrative tasks and much more. At 13 my son was a registered Apple developer. I kid you not!
The accommodation I am referring to in this section is different from the use of home as office expense I discussed above. Here I am referring to the accommodation expense you incur while being away from home. Obviously, if you rent a cabin in the woods to finish your book (as I did for my first novel) then the entire expense is allowable.
The same would apply to hotel cost incurred while gathering information about a specific geographic location – even the hotel itself – that’s features in your novel. You may not need to visit any hotel if your character has a meeting or an intimate moment in a generic hotel while on the run from an assassin. However, if you stayed at the Savoy for a weekend because your lead character, a wealthy dowager, lives there, such an expense — I would argue — is tax deductible.
“Ah,” the man in the pub is back, “but it would not be necessary to do that in order to describe her living environment, so the taxman will disallow it!” Not so. Your expenditure must be incurred ‘wholly and exclusively’ for your trade. There is no obligation for it to be necessarily so incurred. Tax legislation and supporting tax cases are very clear on this point.
Now, no doubt there are those who are now thinking, let’s take the entire family to Honolulu and claim all the expense. Again, sadly, no. Such a family bash would not be exclusively for the book.
The same principles outlined in ‘Accommodation’ above equally apply to travel expenses. Here I am referring to taxis, buses, trains, trams and planes. I will deal with motor expenses separately. As a general principle of tax law a self-employed trader cannot claim as a deduction the cost of travelling from his home to his workplace. Here you have an advantage. Your workplace is your home!
So every time you leave your home the travel is potentially a tax allowable deduction. Of course, you should be travelling to a place relating to your profession as a author — a scene you wish to describe, a book club you wish to attend, a concert or film you wish to see, a fellow author you wish to drop in on or editor or proofreader you wish to visit – the list is endless.
Also remember it is sometimes the journey itself that is as important as the destination. I suspect you do a lot of research without classifying it as such. Your characters share your experiences “How long were you working on your novel?” I asked. “All my life,” he replied. And sometimes we have experiences solely in order for our characters to experience them. This is particularly true of journeys and locations.
Let me explain what I mean. An example of good writing set against the backdrop of a real English town is Damien Boyd’s DI Nick Dixon series; I have read the first two ‘As The Crow Flies’ and ‘Head in the Sand,’ both of which I enjoyed. They are set in Burham-on-Sea, and the honest portrayal of that seaside town is essential to the appeal of the books.
By contrast, some years ago I read an ebook – it would be churlish to name the title – where the protagonist lived in SE10, where I used to, but I could not recognise it at all. At one stage he gets off the underground at a station in the heart of Greenwich. There is no underground station in the heart of Greenwich. The underground system only extends to the Peninsula. I wasn’t enjoying the novel anyway, but this sloppy inaccuracy led me to put the novel aside. It was lazy writing.
We write fiction but the context in which it is written, save for sci-fi, must be accurate. The cost of ensuring such accuracy is tax deductible.
Ah, the beloved motor car. Under this heading I am looking at the cost of running the car, not the car itself. The cost of actually buying the car is tackled in the Capital Items section below.
There are a lot of costs that fall under motor expenses other than petrol. These include oil, road tax, repairs MOT, insurance, etc. These can be added up separately and the total amount claimed, less a proportion for private use of the vehicle. The proportion would depend on the split between your business use of the vehicle and its personal use. So if the business use versus the personal use is, say, 60:40, only 60% of the total cost would be allowed as a business expense.
An alternative to the approach is the Revenue approved flat rate scheme. Under this scheme you may claim 45p for each mile travelled up to 10,000. Over 10,000 the rate you can claim is 25p per mile. Again, this only applies to business miles, but rather than logging each trip it is acceptable to take the same percentage approach discussed above. It is important to note that if you use the flat rate scheme you cannot separately claim capital allowances for the motor vehicle as a capital item.
Given the restricted value of capital allowances for motor vehicles, and the relative simplicity of the flat rate scheme, I believe that in most cases the flat rate scheme is the best option.
Oh, I must not forget motor cyclists. The same principles as above apply, only under the flat rate scheme the cost per mile is 24p with no 10,000 mile adjustment.
Finally, you will have noticed that the cost of parking was not included in the list of allowable expenditure above. It may be claimed separately. It is not part of the flat rate scheme. However, try as one might, you cannot squeeze into this category the cost of parking fines. A parking fine is a penalty. It is a punishment of the government for breaking the law. No government on earth would allow a punishment it has imposed to become a tax deductible expense in the hands of the offender. Come on.
Telephone and fax expenses are, of course, allowable tax deductions. Normally a proportion of the calls are claimed (say, 50% business; 50% personal). I have known some tax inspectors insist that the line rental charge is not an allowable expense, as it would have been incurred anyway, and that only the call cost can be apportioned. Precedent is on their side for this approach, but such an attitude is pernickety and not insisted on by most inspectors I have dealt with.
At the absolute extreme it would be within their rights for the inspectors to request a full call print out and insist that you identify each business (as opposed to personal) call. This is very rare. A reasonable apportionment is normally quite sufficient.
I would mention, however, that for an author distinguishing between a business and a personal call is sometimes difficult. An accountant is calling a specific client, a business colleague, the Revenue or some other regulatory authority. Everyone the author calls (other than his or her immediate family) is a potential customer. One way of ensuring that all your calls are always allowed as a tax allowable expense is simply to have a dedicated business mobile. This is the number you put on your business cards and other promotional material. All calls relating to your business as an author, however tangentially, are made on this line. End of.
The tax treatment of the cost of broadband and wi-fi is very similar to that of telephone and fax. (As an aside, I used to think that broadband and wi-fi were the same thing until my son, with a condescending and exasperated sigh that only teenagers can manage, pointed out the difference while my eyes glazed over. Don’t ask…)
The cost of producing and selling printed copies of your books is obviously an allowable expense. The same applies to other printed promotional materials, business cards, flyers, bookmarkers, badges etc. Christmas cards are an allowable expense to customers, potential customers, agents, or anyone connected with promoting your book. Could this be challenged? Possibly but unlikely.
How about a Christmas or birthday day card with your book cover on the front? These are reasonably inexpensive to order these days, just send a pdf to Vistaprint. Would this be challenged by the Revenue? No.
And don’t be shy in this area: mugs, t-shirts, mouse mats, key-rings. If you are going to give a small gift anyway, well, badge it and make it tax deductible.
Postage is a straightforward expense. Don’t forget to include the postage related to sending out any of the promotional items just mentioned. Include all relevant photocopying too.
Ah, novels. These we love. Our general readers will not be able to claim the cost of novels as a tax deductible expense but our fellow novelists can. And you can claim the cost of their novels. Reading novels is absolutely essential for us to hone our craft.
William Faulkner said it best, “Read,read,read. Read everything – trash, classics, good and bad, and see how they do it. Just like a carpenter who works as an apprentice and studies the master. Read! You’ll absorb it. Then write. If it’s good, you’ll find out. If it’s not, throw it out the window.”
Novels are as essential to us as running shoes are to Usain Bolt. We could not write unless we read. Often. And always. We need novels like a barrister needs law reports. They are part of the tools of our trade. And we should claim for them. All of them. Every single one of them.
You are a writer. You read a daily newspaper. You read magazines and journals, some relating to writing, some relating to whatever areas you or your characters are interested in or need to know about. That covers every newspaper and every journal. You read reference books. Same. All such expenditure is an allowable tax deduction.
This one I think is fairly straightforward. The cost of a writing courses is tax deductible for a writer. The cost of attending a writing course is tax deductible for a writer.
Now let me, as is my wont, push the boat out a little further. Is the cost of a course on public speaking allowable? I would say, if you took the course in order to learn how best to promote your book through public talks. How about a course on cooking? Well if your lead character is a chef… You see where I’m going.
The same principles apply to conferences. Any James Bond type novelist would wish to attend the latest Motor Show, surely?
You are in the entertainment business. The cost of theatre, cinema and concert tickets, and related travel expenses are allowable, in my opinion, provided that the theatrical, cinematographic or musical event is pertinent to your profession as a writer. This is a tighter fit than buying books, but it is still a fit. The test for allowing the expenditure, as you now know, is whether it is incurred ‘wholly and exclusively’ for the purpose of your trade. It does not have to be ‘necessarily’ incurred. This has been discussed elsewhere. Even so, I would treat claiming this expenditure with, perhaps, a little discretion. The same applies to DVD’s.
In ‘On Writing’ by Stephen King –— a book I would strongly recommend by the way — listening to music while writing is discussed. Stephen King himself listen to rock music while he writes, bands like Metallic and Anthrax. What do you listen to? Personally, I write in silence. Sounds distracts me; but each to their own. If you buy music to write to, claim it.
More interesting, perhaps, is the cost of music for your characters, or the background music in a scene you are writing. Music helps to evoke a mood, a time and a place. Mention New Orleans and I think of Jazz; mention Jamaica and I think of reggae. That is place to music; it also works from artist to time. Mention Janis Joplin and I think of the 60’s; Spice Girls, the 90’s. If you need to buy the CD to re-connect with (or discover) the music for the sake of your story, the cost is allowable.
What about subscriptions: Sky, Netflix, Amazon Prime? You may think I’d be jumping all over this one, after all I have no problem with books, magazines and theatre and concert tickets, and yet I hesitate. The reason is this. Those other activities required a specific action on your part. Watching TV is passive, one programmes flows into the next, then the next… For me it fails the ‘exclusivity’ test. But, hey, you’ve got enough to be getting on with.
If you incur bank interest and charges or credit card interest and charges, these are allowable provided the costs arose as a result of a debt incurred as a result of a business expense. If, say, you bought your computer on credit all related finance charges are allowable. The same applies to leasing costs.
I would mention here that it makes sense (though it is not absolutely necessary) for you to have a separate business bank account and a separate business credit card. This is discussed in more detail is the bookkeeping section elsewhere.
All accountancy, legal and professional fees pertaining to the business are an allowable expense. So, should you appoint me as your accountant or tax advisor, my fees are tax fully tax deductible.
Entertaining is specifically disallowed as an allowable deduction. Taking book club organisers or ebook formatters to dinner may be a generous thing to do, and may you enjoy the evening enormously, but its cost is not tax deductible. The legislation is clear on this point.
However, food provided at a promotional book event, where the food is provided is ancillary to the main event, is allowable. You may be tempted to play around with this one. You may be tempted to say to your friend in the pub (yeah, the same one): “Hey, I’ve brought the book around lads; have a look at it, the next rounds on me!” I wouldn’t. This is an area the tax inspector knows is likely to be abused and most tax inspectors keep a keen eye on it.
Subsistence is another tricky one. As buccaneering as I may well be on many claims for deductions, here I shy away. There is certainly some wiggle room, and there have been tax cases on this issue which I will explain and analyze in depth in future blogs.
There are so many forms of advertising today, with the advance of technology and social media. Traditional advertising is, of course, allowable. So is the expense associated with the ever-expanding social media: websites, Facebook, Twitter, Instagram and others.
Clothing is an area where many self-employed traders cross the line and get into trouble. In broad terms, clothing is not an allowable expense. In a leading case Ann Mallalieu an accomplished barrister (now a Baroness, no less) failed in her attempt to get the dark clothes she wore under her court robes as an allowable expense, the judge opining that although her “subjective intention was to buy clothes for work, clothes were needed as a human being for warmth and decency.”
Now, if the courts are not going to allow clothing for one of their own, I think it fair to say that our chances are pretty slim. So it is no good trying to claim your favourite woolly jumper as an expense even if you only ever wear it for writing. I sometimes put on a cap as I write (I don’t know why), but I’ve never claimed for it. Your Noel Coward smoking jacket or your ‘Don’t talk to me I’m writing’ T-shirt, sorry, don’t even try.
There are exceptions (in tax law there are always exceptions). Uniforms are allowed and theatrical costumes; protective clothing – like a contractor’s hard hat and boots – are allowable too. But these are hardly applicable to writers. I know you could think of examples… hey, I’m ahead of you. Don’t go there.
There are items you will buy that cannot be claimed as a business expense in your income and expenditure account because their useful life is over one year. Such items are referred to as capital (not to be confused with the ‘capital introduced’ into your business accounts which is a separate matter discussed elsewhere on this website. This is an area which, I’ve found, induces tedium in readers. So let me be stark and direct. Computers are capital items, so are desks, photocopiers, fax machines and other office furniture, largely tangible things you can slap your hand on.
For these items you can claim capital allowances. Their costs is supposed spread over the life of the asset (known as a writing down allowances, currently at an annual rate of 18%). Bad news, right? No, because there are exceptions (tax law again!). If the amount of capital items you buy in the year (after 1 January 2022 to 31 March 2023) are in aggregate under £1,000,000, the whole expenditure attracts a capital allowance rate of 100%. That is, you can write off the entire cost in the year of purchase. Not bad, eh? Anything over that sum will qualify for writing down allowances in the normal way.
A motor car is a capital item, but the above rules do not apply. They are entitled to a writing down allowance of either 6% or 18% depending on their CO2 emissions.
So, to be clear the amount of your taxable profits or tax losses is your income less allowable expenses, less capital allowances.
Finally, the cost of repairing a capital asset is a simple allowable deduction. There is no need to claim capital allowances separately.