Deal with income tax
ⓒ stock xchng
One of the first things you must consider when you begin earning money as a writer is how to deal with income tax.
Register with the Inland Revenue
As a freelance writer, you are essentially self-employed. This is true even if you are employed elsewhere.
To register as self employed, go to the Inland Revenues website (www.hmrc.gov.uk), click on self-employment, and follow the online steps, or call the Newly Self-employed Helpline on 0845 915 4515.
Make sure you have your National Insurance number and the date you became self-employed to hand. As a writer, this will be the date your first piece of work is published, or that you receive payment for it.
Declare your income
There is a tax-free limit of £6,035 for the 2007-2008 tax year. If you earn less than this in a tax year, you will not need to pay tax on it, though you will still be eligible for national insurance contributions.
However, even if your income is below this amount, you still need to be registered as self employed, and every payment you receive as a writer must be declared.
Set aside money for tax
The amount you need to set aside ranges from 10 per cent to 40 per cent, depending on how much you earn.
Basic rate of 20 per cent applies to anyone earning up to £34,800 during the 2008-2009 tax year.
Anyone earning over £34,800 in the 2008-2009 tax year must pay the higher rate of 40 per cent.
Remember the important dates
If you are registered as self-employed you’ll be sent a Self Assessment tax return, or a Notice to File (soon after the end of the tax year on April 5th. This means that if you register as self-employed on August 1st of 2008, you won’t receive the relevant paper until April 2009.
The online form must be completed by January 31st. The paper form must be returned by October 31st.
Offset your expenses
You can offset some expenses, as long as they are in the course of your work. This can include stamps, printer cartridges, and administration costs and some travel costs.
Sustenance is not applicable, as you would need to eat regardless of your working circumstances. Items such as clothes and entertaining are also not tax allowable.
You should seek advice from a professional to ensure your costs are tax deductible. You will need to be able to present all relevant receipts in order to complete your claim.
Pay National Insurance contributions
If you are employed by a company as well as working as a freelance writer, your income is added together from all sources. As an employed individual you pass will pay Class 1 NIC and as self employed you will pay class 2 and 4
If your income reaches or exceeds £67,000, you will need to register for VAT.
Information supplied by Karen Butler FCCA (Fellow Chartered Certified Accountant).
For more information, contact Karen on Tel: 01485 601499
Email: Karen@TaxReturnOnlineServices.co.uk
Or visit www.taxreturnonlineservices.co.uk
DISCLAIMER
Neither the author nor EssentialWriters.com are responsible for any loss of business or profits arising from action followed due to this advice. This article is intended for general guidance only and professional assistance should be sought based on your particular circumstances.
