Royalty payments / tax

[Heartworm]

The wife has successfully managed to write a book and get a good book deal from a publisher which will provide an advance and, hopefully, royalties. We aren’t talking a lot of money but how would an author normally be paid, through a ltd company? Curious how this works with the tax system as we’ve both always been Paye.

[anonymous-user]

Without indicative numbers it's hard to comment.

Most authors earn peanuts. As in all of the arts a tiny handful of people make almost all of the money. (Adele; J K Rowling)

We then get into the question of "why a limited company"? Are you trying to spread a large advance over several years to suppress income tax? Are there particular expenses you're trying to offset?

In summary: If the numbers are small, forget it. If the numbers are large, pay an expert accountant for advice.

[trickywoo]

Keeping everything as simple as possible the least she can do now is a self assessment return.

There isn’t any point setting up a limited company imo.

[Heartworm]

trickywoo said:

Keeping everything as simple as possible the least she can do now is a self assessment return.

There isn’t any point setting up a limited company imo.

Sounds perfect thanks, it's not big numbers but enough that we wouldn't want to get caught out with a surprise tax bill at some point. I completely forgot about being able typo do a self assessment /thought that required a company of some form to carry out.

rockin said:

Without indicative numbers it's hard to comment.

Most authors earn peanuts. As in all of the arts a tiny handful of people make almost all of the money. (Adele; J K Rowling)

We then get into the question of "why a limited company"? Are you trying to spread a large advance over several years to suppress income tax? Are there particular expenses you're trying to offset?

In summary: If the numbers are small, forget it. If the numbers are large, pay an expert accountant for advice.

Numbers are definitely not large, can't think of any real expenses and as above just forgot about self assessment as its not something I've ever had to do and anyone I know who'll had done it has done it as contractor.

Edited by Heartworm on Monday 16th December 21:54

[Groat]

Heartworm said:

..... can't think of any real expenses ......

Apart from the obvious stuff (word processor etc etc) there's the possibly quite genuine and substantial costs of research.

I'd have thought whoever's publishing it should be able to guide you.

[Heres Johnny]

I recall years ago authors could spread earnings across years because of the potentially peaky nature of earnings. Quick google throws up this, there may be more up to date info

https://www.gov.uk/government/publications/averagi...

[Eric Mc]

Earning royalties from your own work is, in principle, no different from any other form of self employment. Therefore, the individual will be assessed for tax on the PROFITS that are generated by that activity. This means that the author is allowed offset against the royalty income, the allowable business related costs incurred in generating that income. That includes all the usual things you would expect including research and travel costs incurred whilst putting the article/book or whatever together.

In the first year or so, writing activity often generates losses - which can be offset against other income and as a result, tax refunds claimed.

See an accountant.

[Heartworm]

Groat said:

Apart from the obvious stuff (word processor etc etc) there's the possibly quite genuine and substantial costs of research.

I'd have thought whoever's publishing it should be able to guide you.

The book is more or less done, she wrote it as a hobby and unexpectedly a publisher approached her. She has an all singing all dancing laptop I purchased a couple years ago so I don't see too many expenses appearing after this.

It probably is worth approaching an accountant, but I expect this will take away most of the cash she will earn unless the book shifts millions.

[Eric Mc]

Does she have any other income on which she pays tax?

[Heartworm]

Eric Mc said:

Does she have any other income on which she pays tax?

No she doesn't, she only works a few hours a week to keep herself occupied.

[Macron]

How did the publisher find out she’d written it?!

[Eric Mc]

Heartworm said:

Eric Mc said:

Does she have any other income on which she pays tax?

No she doesn't, she only works a few hours a week to keep herself occupied.

I was just checking to see if there were any tax refunds she might be able to claim because I am pretty convinced that, at the moment, any accounts prepared for her writing activities would almost definitely show losses rather than profits.