Note: My non-fiction book How to Self-publish and Market a Children’s Book (Second Edition) is out in print and as an eBook 🙂 Whether you’re just starting out with self-publishing or are part way through your journey this comprehensive resource provides practical guidance for planning and creating picture books, chapter books or middle grade novels and (crucially) tried and tested strategies for selling more books through author visits to schools, other events, local bookshops and online through advertising and social media marketing. Find out more and about what’s inside this new edition for May 2021 here.
Updated September 2019 and January 2020
Please note that I am not a tax expert or adviser so always check the facts with HMRC or an accountant if you are in doubt. HMRC’s twitter feed is also a good place to ask quick questions!
If you’re a UK-based author starting to get income from your book sales it’s important to know what you need to do about tax. HM Revenue & Customs (HMRC) will count such income as ‘business income’ – however small – and, depending on how much you are earning, you may need to register to complete a Self-assessment Tax Return and pay Income Tax and National Insurance on your earnings.
But don’t panic yet! You will only pay tax on your book royalties if your overall income (from your books and any other sources, such as your day job, interest on savings, etc) is above a certain level. And the rate of tax you will pay will depend on that overall level of income. Similarly, you will only need to pay National Insurance if your income from the book sales is above a certain level.
Also (update January 2020) you will only need to register to complete a tax return for the first time if your income from royalties is above £1,000 in the tax year, which runs from 6 April to 5th April (assuming you have no other self-employed income that takes you above the threshold).
So how do you declare your book royalties if they exceed £1,000?
For most UK authors starting out, the way to declare and pay any tax due on your royalties is to register as a self-employed sole trader with HMRC. (You could look at setting up a limited company but I won’t cover this here – see the links at the end of the page to find out about other business structures.)
Once registered as self-employed you’ll need to complete a self-assessment tax return each year. This is basically an online (or paper*) form on which you declare all of your income – from employment, savings, any investments or rental income etc – for each tax year (remember: a tax year runs from 6 April to 5 April). You would include your income from book sales in the self-employment pages.
The good news is that here you can also put down any expenses associated with your book writing as these get deducted from any profit you make before any tax is worked out. And, more conveniently, there is now a £1,000 Trading Allowance that you can choose to use against your income from self-employment income instead of claiming expenses separately if these are £1,000 or less – this is much makes life much easier than it used to be. Remember to keep records of your expenses nevertheless.
How to register as self-employed
You can register as self-employed quickly and easily either online at gov.uk here or by phone by calling HMRC on 0300 200 3500 and saying to the automated message request that you’re calling to set up as self-employed. Make sure you have your National Insurance number to hand if you have one. (The initial message tries to steer you to register online, but if you hang on and speak to the operator you can do it entirely over the phone – or certainly that was the case when I last tested it in 2018.)
Register as soon as you can if you think that income from your books is approaching £1,000 – the deadline for completing a paper tax return each is 30 October* and 31 January for online returns, so leave enough time to be sure you can meet these dates. According to the gov.uk website, if you register later than 5 October in your second tax year of business, you could be charged a penalty. (NB Ignore the automated message that says ‘you can only register during the week you start work’ – this apparently means that you can only register ‘in advance’ in the week you become self-employed.)
*(I believe the option to file paper returns is available only to very few people now, eg those who have always filed paper returns.)
Class 2 National Insurance
Once registered as self-employed you’ll automatically pay Class 2 National Insurance if your annual taxable profits from self-employment (book sales for this purpose) are £6,365 or more a year per year in the tax year 2019-20. Class 2 National Insurance is charged at a flat rate of £3 per week (2019-20) and included/accounted for in the tax bill you receive after sending in your tax return.
If you have low earnings
If your book royalties are below the Class 2 thresholds then no Class 2 National Insurance is payable. However bear in mind that Class 2 contributions count towards your entitlement to the State Pension and other benefits, so if you’re not already paying Class 1 through the day job, you might decide to pay Class 2 voluntarily even if your income is below the threshold. Ask HMRC about this when registering as self-employed, or you can read about paying voluntary contributions on the gov.uk website here.
Class 4 National Insurance if books sales are flying!
If you’re lucky enough that the taxable profits from your book sales are £8,632 or more for 2019-20 you will pay Class 4 contributions on any profit above these amounts at a rate of 9% for profits between £8,632 and £50,000 and 2% for any element of profits above £50,000. You don’t need to do anything about this now – the profit is worked out when you complete your self-assessment tax return each year and is included in your annual tax bill.
Do I really need to complete a tax return every year if I only have a few sales?
Speaking to the HMRC helpline back in April 2016 it seemed the answer to this was ‘yes’ – to start with at least. However, once you send in your first couple of returns, if they see that your income from book sales is small they may contact you and offer to take you out of self-assessment and allow you to estimate and pay your income in a simpler way – for example through your day-job payslip. Either way, think positively! Small sales may grow faster than you expect. And if you’re serious about your writing, once you are set up in self-assessment it may be as simple just to stick with it so that you’re ready for when the surge happens…
More useful tax links for UK authors…
You can find out more about self-employment, self-assessment tax returns and other business structures by using the links below:
- Self-assessment tax returns – info from gov.uk
- Self-employed National Insurance rates – gov.uk
- Choose a legal structure for a new business – gov.uk
- Self-employed record keeping – info from HMRC
- UK Income Tax rates and thresholds – gov.uk
And remember to check out my related post about how to reclaim tax on US royalties
Tax doesn’t have to be taxing….!
Updated January 2020
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Thanks for this article. I’m a little bit confused and am hoping you can help me out. I sell my book via Amazon and they take 40% of the cut before I get paid my royalties. I’m just looking into my self assessment and am unsure if my income is „just“ the pay I receive from Amazon, minus any expenses I had for advertising etc. or is my income the total book price? I’m asking as I’m very confused how to add this all up otherwise as my book has sold internationally etc and Amazon does not provide me with an invoice for the costs they deducted before paying my royalties. These are all in different currencies and my book price has changed over the year. Hope you understand what I’m trying to say and can help. Thanks so much, Kay
Firstly to say I’m not an accountant and so cannot give you advice — but I’ll give a simple explanation below. (I don’t know what level of royalties you are receiving — if it’s in the thousands of dollars etc then you may need to get advice from a small business accountant. Most will give you a free hour of their time to assess your needs. If you’re only receiving a small amount then you should be able to do this yourself and follow the gov.uk guidance — see link below.)
In answer to your specific question, it’s only the actual total amount of payment received from Amazon etc that counts as your income, ie after they have taken their cut.
As for your advertising and other expenses, they are added in a separate box under expenditure.
HMRC automatically works out your overall profit by deducting your expenditure from your royalty income — what’s left is is your ‘profit’ and HMRC works out your tax bill based on this and any other income you have from other sources such as investments or rental income, or employment income from a day job.
If you are getting royalties in different currencies and receive and hold that money in foreign currency accounts then I’d talk to an accountant if it’s in significant amounts.
But if Amazon converts those royalties to UK £ when they actually pay and that money lands in your UK bank accounts, then that simply forms part of your overall royalty income which you report on your SA return.
Gov uk has detailed notes on how to keep records and complete the return btw https://www.gov.uk/topic/business-tax/self-employed
(I get quite a lot of overseas income and so hold foreign currency accounts and use FreeAgent software which takes account of this sort of thing then automatically converts the values for the tax return figures — but I am a limited company and my accountant takes care of all of that.)
I hope that helps. HMRC is very helpful if you are really confused — call their self-employed helpline.
Best of luck with it!
Hi Karen! This is so helpful. My book is with an editor at a publishing house now and she’s interested in it. I realised that means I might get a book deal soon and I’d have to apply for tax and things. So I’d apply for self-employment on the Gov website? Am I too late for the year now as it’s after October? I didn’t apply sooner as I had no idea if/when I’d get an offer. And if I was to get a book deal and money in December, does that mean I’m paying tax for the 2021-22 year, because I’d be earning after April 21? Thanks so much! I’m brand new to this so it’s kind of a lot to wrap my head around!
Hi Megan — congratulations on your possible deal (hopefully this is with a traditional publisher an no one has asked you to pay them to edit or publish your manuscript? If they have, don’t do it…) Assuming all is good, then if you got an advance this tax year in December then it would go on the 21-22 tax return you fill out that gets sent out next April (they do everything in arrears). As far as registering as self employed goes, I would call the HMRC helpline and get their advice as it seems to vary, depending on how much the income is and whether you are already an employee in a day job. If you are they may offer to collect the tax via your tax code, though personally I would always fill out a tax return as it’s more accurate. Good luck and sorry I’ve only just seen this! NB I am not an accountant. Others who follow this page and who are accountants may leave a separate comment. Karen
This was informative and a wealth of resources for looking into taxes further. Thank you for the help and advice.
Thanks so much for this article!
Quick question,I published December 2020. As I understand it, I have until October 2021 to declare my earnings so far.
With KDP you may be aware they pay earnings 60 days after the month of sales ends. Do I declare my earnings to HMRC and include any profits from December 2020 – 5th April 2021, or do I extend the earnings date to December 2020 – 5th June 2021 because I don’t actually receive April’s payment until June 2021 (60 days later)?
I hope this is clear
I will just point out that I am an accountant and wanted to clarify a couple of things.
You have until the end of October to register with HMRC.
If you decide to file your tax return on paper, you will also have to file by 31st October.
You will most likely be reporting for the full period 6th April 2020 to 5th April 2021 for the current tax return.
If you file online, you have until 31st January to file and pay any tax due.
Please be careful of the advice in this article around the trading allowance – if you are self employed already, you can only use the trading allowance once, so for many self employed people, the trading allowance won’t be available to them.
To be honest, I would recommend speaking to an accountant. Assuming this is your only additional income above an employed job/pension, the costs shouldn’t be too much and they will support you to get it right.
You are welcome to contact me if you are interested – dbuaccounting.co.uk
Good luck with your future sales and publications!
First a big thank you for running this blog. It’s proved extremely useful for me and I’m sure for many other authors.
I have previously self published a series of book with KDP as a UK sole trader. I’ve spoken to my accountant who has suggested that it could be worthwhile setting up a LTD company. My question regards withholding tax. Is it simply a matter of completing a new tax interview with the corporation tax number instead of National Insurance number? Or are there further hoops to jump through and other implications when transferring from one to the other?
Hi Chris — the honest answer is I’m not sure! Your accountant should know but if he/she doesn’t you could try calling the IRS in the US to ask them? I was a Ltd Company from the outset so this didn’t come up. If you next tax interview is due soon you could just wait until that comes around I guess? Sorry I can’t be of more help! Karen
Thanks for the reply. Will see what the accountant and the IRS have to say.
This is a bit of a shock. For about 10 years I have earned about £4-5k annually in self-published book royalties and have not registered as a ‘sole trader’. For several years this has been my only source of earned income. Each year I do a tax return and put the amount in “other income” with a description of “book royalties”. HMRC have never once queried it or suggested I should register as self employed. When I first started doing this I scoured the .gov website and did not find any advice to the contrary.
I’m now considering paying for missing years’ NI contributions and they would be much cheaper as a sole trader. But if I now ask to change there may be fines for misreporting my status in previous years so it could end up costing me more. What a quandary!
Hi Ruth — I’m not sure what to say here as I’m not an accountant. Why don’t you have a chat with a small business accountant to see what they say — most will offer an initial chat for free I think? Alternatively you could simply call the Self-Employed helpline and ask them. The fact that you have declared the income and they have not questioned it makes it highly unlikely that they would fine you in my view! Best of luck with it either way. K
I would just like to point out that I am an accountant.
As you say this is your sole income, and it has been under the personal allowance, HMRC are unlikely to have queried it for that reason.
As your income was also below the National Insurance threshold, you haven’t underpaid NI either.
Technically, you should have registered as self employed and completed the self employed section of the tax return rather than just entering in the other income section.
It would be worth you registering as self employed, and completing the tax return correctly in future, but if it continues to be your sole income, then you are unlikely to owe any tax while it remains below the personal allowance.
I would recommend discussing with an accountant to ensure you get it all right (they should also be able to support you in registering as self employed), and if this is your sole income, the costs shouldn’t be too high.
If you are interested, you are welcome to contact me – dbuaccounting.co.uk
Do I need to open a business bank account or would a new basic/current account be ok for my Amazon earnings please?
If I run any other home based business e.g. selling on Etsy, should I get a new bank account to keep the money separate.
I have been searching for an answer for days now. I am thinking of opening an app based bank account and applying for a business account but I see a few authors say they have a regular account to receive their Amazon earnings.
I would appreciate an answer.
Hi Mica — I’m not an accountant or tax adviser but if you are a sole trader I don’t think you *have* to open a business account, however for your own sanity it may help to do so — or at least to run everything through a separate bank account that you don’t use for personal stuff. That way when you come to do your accounts you will find expenditure and income relating to your business activity all in the one place rather than mixed in with your personal stuff. If in doubt a small business accountant would probably answer this question for you as part of initial enquiries for free. OR maybe call the HMRC self-employed helpline or ask them on twitter ‘Do I have to have a separate business bank account if I’m a sole trader’ and see what they say? Oh — I’ve just googled the question and I’m correct. https://www.moneysavingexpert.com/banking/business-bank-account/ I think it worth it just for convenience even if there’s a small charge but it’d down to you. Hope that helps! Karen
Hi again, Mica — just to clarify, when I say above ‘when you come to do your accounts’ I meant when you come to complete the self-employed pages on your self assessment tax return (assuming your are a sole trader and not a limited company).
Thank you Karen. I have enquired about opening a separate personal account to receive Amazon payments, they said it’s against their terms and conditions. There are huge delays with opening business accounts at the moment. I will have to wait to see if I can get a business account with Monzo, Starling or Revolt. Waiting replies.
This may help https://writers.tax/tax/do-i-need-a-separate-business-account-for-my-writing-income/
Just to let you know that I am an accountant.
As a self employed person, you don’t have to have a separate bank account as long as your records are kept correctly.
If you do have a separate bank account, it doesn’t need to be a business account.
If you are interested in getting an accountant, you would be welcome to contact me – firstname.lastname@example.org
I am still awaiting a response
Hi Angela — I don’t see any question from you? Karen
This was super informative, thank you! But I still have a few questions. I have just self-published my first book with KDP. I made sure to include my national insurance number during the tax interview conducted. With regards to taxes,
from September 2020-September 2021, I will be a full time student. From there one outwards, I will hopefully be working as a teacher full-time. My question is, do I register as self-employed now, before I’ve even made any money from publishing, or am I supposed to do it if it looks like I might reach the £1000 a year threshold? I ask because I doubt I’ll be getting anywhere close to £1000 a year through my anthology- it’s just there so that when random people compliment my poetry I can direct them to where they can buy more of it, lol! And then also, with regards to American taxes, with the 0% secured through my NI number, will there be any forms I need to fill in and send to the IRS at any point?
Hi — am not a tax adviser but when I last spoke to HMRC they said no need to register unless your income looks likely to exceed £1,000 in the tax year. Since you have published in the 2020-2021 tax year (which runs from 6 April 2020 to 5th April 2021, you won’t need to file a return until 6th April 2021 at the very earliest (with the ultimate deadline being 31st January 2022 and most people scrabbling around in January to meet the deadline!). Based on what you have said I would hold off and just watch your sales over coming months. Then if in doubt call the Self Employed Helpline which by then hopefully will be back up and available to get through to! It’s good that you’ve completed the interview as that means no tax will be deducted at source. And, no, there is nothing to file with the IRS — they simply send you a statement each year confirming what royalties you have earned and what tax has been deducted — ie nil. I hope that helps but if in doubt call HMRC. With very best wishes and best of luck with your book (and studies!) 😊 Karen
Hi Koltuk – are you traditionally published or self-published? And are you asking about VAT or UK income tax?
Do the publisher deal with it? I know that ebooks are subject to VAT, and there will be an ebook as well as a print version.
Karen does this tax and other info on your website and book apply today in 2019.
Thank you for your help.
Kindest regards K Howard Weston
Hi Kenneth – if you’re referring to UK tax rates etc for 2018-19 and process for contacting HMRC then yes it does. I am not a tax adviser, however — so I would highly recommend that you double check by following the links to gov uk and by calling the HMRC Self-employment helpline to see whether or not you need to register as self-employed. As I say above, if your income from books is negligible or low they may say you don’t need to. I hope that helps. As far as the wider information goes, if you are a children’s author I would highly recommend that you buy my book How to Self-publish and Market a Children’s Book as this contains much more– and more up-to-date — information on children’s books self-publishing and book marketing. Karen
Hi Karen, a great help this blog has been. So today we got an EIN just by calling up that was pretty quick – 5 mins, we did get asked when our returns were due though and that was an extra question and not on the form. Also when they refer to the US Taxpayer Identification Number that covers the whole gambit including the EIN and now there are drop down options. I completed Smashwords and KDP today and entered both the US EIN and our Corp Tax Ref on the online form W-8BEN-E. From my experience today I would say it is still not clear as to whether the EIN is required it seems preferable to get an EIN if you are a business.Lastly I got thrown on the Claim of Tax Treaty Benefits as it now offers article 25 as the default not 12. The key thing is it says ‘zero’ tax on the statement at the end, so hopefully it’s all good. I decided to do it today as I wasn’t sure if the IRS would be affected by any US Gov shutdown and we go live soon with our book.
Excellent post very informative for us Authors
A friend of mine has written a book but has sadly passed away before publishing it. She asked that I publish the book and donate all royalties to charity. Are you able to give any advice on how I would go about doing this without having to pay tax on this too.
Hi David — I’m very sorry to hear about your friend’s passing.
I’m afraid I don’t know as I’m not a tax adviser – this is really an estate planning question. I think you need to talk to an adviser that specialises in this area — but i suppose you could begin by asking the question in a few tax planning forums and you may bet some free pointers.
Sorry I can’t be of more help.
Hi I’m wondering if I publish a few ebooks on amazon kdp, will my royalties be pre taxed or I still need to tax them? Because from what I can gather if your a non us citizen (I’m from uk) then amazon hold 30% of your royalties paid for us tax purposes, any advice would be helpful thank you,
Hi Liam If you do nothing Amazon will deduct 30% royalties to give to the USA tax office. But in the UK you are probably paying lower than 30% tax so it makes sense to do the tax interview described in my post called ‘Tax on US Royalties’ so they don’t tax your royalties in America and instead you declare them over here to HMRC and pay less tax on them. I hope that helps! Read that other post! >>https://selfpublishingadventures.com/tax/🙂
Hi. Great article, thank you. I’ve found this site by looking at what to do in my own situation, but am still slightly in the dark even after all the helpful comments. I’m a UK-based writer and last year I posted my book on Amazon Kindle and made it available in all territories. I registered for paying tax in the US, and today received a 1042-S form from Amazon (foreign person’s US source income subject to witholding). I have no idea what to do with it! Do I fill it in and send to Amazon? To the US tax office? What? So far I’ve made less than £5 from sales (haltingly have to admit the work may not be terriby good), so do I even need to declare anything? I am not otherwise employed or claiming benefits. I honestly hate dealing with tax issues – they always leave me feeling slightly violated…
Hi Martin — if you’re UK based then you shouldn’t be paying any US tax. The way to ensure they don’t withhold 30% is to follow the steps in my article and video. With regards to the form you have received, this is for information only normally. I get one from each distributor each year — it’s simply confirming that I received income from book royalties on which no US tax was paid due to the double taxation treaty. I then declare those royalties on my UK tax return instead. If you are saying that you *have* paid tax in the US I then it may be that you could let HMRC know this so they know not to deduct any here on your sales when you declare them on your tax return. But I’m not sure whether I’ve properly understood your situation. If I were you I’d get your Tax Interview done so that going forward you don’t have US tax deducted as 30% is likely to be higher than what you’d pay here unless you are selling thousands of books 🙂 Sorry I can’t be of more help, but do look at the video for how to get the US tax reduced to zero going forward. With regards to getting back US tax already deducted I don’t know the process I’m afraid, but I have read around that it’s often not worth the hassle for just a few pounds — and there is a time limit I think. Best of luck with it. Karen
I understand this page is for self-published authors, but how does it work for those traditionally published authors? My book is being Published by Amberley, a pretty big company on May 15th. In this case, is tax automatically deducted from price of the boo, before any royalties? Do the publisher deal with it? I know that ebooks are subject to VAT, and there will be an ebook as well as a print version.
Hi there — sorry for the delayed reply. As you have a publisher they will be able to answer these questions for you. But in essence, any royalties they pay you count as income and you would have to declare that on your tax return. You would then pay tax at the appropriate rate — this in turn depends on your overall income in the tax year (eg as well as from your roytalies, if you have other sources such as a job, or savings and investments — for tax rates see https://www.gov.uk/income-tax-rates). Since you aren’t the publisher, I wouldn’t worry about trying to understand any VAT implications for ebooks — all you need to know is your royalties amounts and declare this to HMRC at the end of each tax year. Hope this helps but if in doubt I’d recommend talking to a small business accountant. Or read about tax and being self-employed on gov uk https://www.gov.uk/working-for-yourself
All the best, Karen
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Great site, Karen. Keep up the good work. As a UK author publishing his KIndle books on Amazon, I want to reclaim the witholding tax that the IRS took from my books when I first started publishing on Amazon back in 2012-13. However, I am somewhat confused about how to go about it. Some say it is very complicated in regard to all the questions the IRS asks you on the 1042S claim form (and it certainly does seem that way, as I have downloaded the form to view myself!). Others say it is easier now. What do you think? And do you think I would have any success claiming back this withholding tax from 2012-13?
Hi Alan – I’m so sorry but I’ve no idea as I’ve not been in this position before, so I would just go on what other commenters say. I also suppose it depends on how much money you’re talking about! If it’s a few pounds I’d not bother but if it’s a reasonable amount then worth a try. I do recall there are cut-off times for reclaims but you’d need to check that. It would help others here if you leave a comment to let us know how it went if you do decide to try! Sorry I can’t be of more help, Karen
I hope someone sees this and this site has not closed down, need a little help. I have read through comments questions replies, mine is:
Im on disability benefits no other income
I have self published first book april this year royalty going through
Question what do i do about declaring hmrc do i need to set up sole trader, what do i need to declare benefits, to where?
Please help i really dont want to get stuck in a mess so trying to sort it early
Oh, and also – I forgot to add – when setting up as a sole trader I think I need a business name. What on earth do I do here? Do I need something official, or is it just something for reference? As a writer I kind of thought my name would be my business, but I don’t think it would be. I’m quite confused about it – or am I just overthinking a minor detail?
Hi Kim — I recommend that you call HMRC’s Self-Employed helpline and ask them >> 0300 200 3504. I expect they may tell you not to register as self-employed until you know you’ll be getting income from your books. They will be very helpful and I’m sure you won’t be the first person to ask! As far as having to provide tax information to Kindle goes, you can now use your National Insurance number. I cover this in my related post here > https://kareninglis.wordpress.com/tax/ the bit that’s relevant for you is where it talks about applying as an individual / sole trader. I hope that helps and best of luck 🙂
Hi Kim – just to say that I’ve just spoken to HMRC and it seems the info above still holds — ie technically once you start to get an income from you books you’d need to register as self-employed, and they then may later take a view on whether you need to carry on filling in a tax return if your income is very low, as I mention above.
While here I have updated the info about Class 2 National Insurance to reflect the fact that this is now collected via your tax return — you don’t need to set up a direct debit any longer. I can’t believe how time flies – I had clean forgotten to update that section in the last year 🙂
Regarding a name — can call yourself what you want; use your own name or another one (provided you don’t of course use a trademarked name!) See this page for info on this — https://www.gov.uk/choose-company-name .
All the best,
Thank you, Karen, this matter is so confusing!
I have a question I hope you or someone else can help me with, I’m really just looking for as simple an answer as I can get:
I’m about to self-publish my first book. I’m unemployed and don’t actually have any tax information to give Amazon in order to self-publish because I’ve never made enough to rise above the personal allowance, which means I’m at a bit of an impasse. When I went to get the ball rolling on KDP it threw up taxes, which never even occurred to me because I’ve yet to pay any, and I’m now unable to proceed.
From this post I gather I should set up as self-employed, but I’m currently still living with my parents as a full-time carer for my mum so the only money I really see is non-taxable carer’s allowance and a little bit from the jewellery I make and sell online which, even disregarding what’s profit and what’s expenses, barely brings me to £3000 a year, so I’m not actually making enough to be taxed and have – to my knowledge – no tax information.
Should I still set up as self-employed as a sole trader if I’m making nothing taxable now, and don’t expect to make much from my kindle books (though I hope I’m wrong!)? Clearly I need some kind of tax information or I can’t proceed at all, and the option of ‘waiting until I’ve already published it’ isn’t remotely an option for me at all, but I’m concerned about what happens if I set up as a business with nothing to show for it.
Any help anyone can give me is hugely appreciated!
That’s great, thank you so much for such a thorough and speedy reply!
My pleasure 🙂 BTW I’m bringing out a detailed book on self-publishing later in the year – with some great info beyond what’s on this blog about tips and tools I’ve found work best for print and eBooks that contain illustrations . If you want to know more you can join my mailing list above as subscribers will be the first to know about it. (I rarely send out newsletters… fear not… – the last one may have been more than a year ago, in fact…)
Best of luck with your project!
Hi Karen, I’ve recently registered for VAT in the UK. I don’t seem to be able to find any information on whether ebook sellers on Amazon are responsible for collecting and paying VAT or if Amazon do it all before royalties are given out. Any ideas?
Hi — if you are selling on Amazon via KDP (or any other third party such as Apple’s iBooks) they are responsible for collecting the VAT and it’s wrapped into the price your book shows at. In the case of KDP you will see this when you choose the price of your book and the VAT rate varies by country of sale. You only are responsible for charging and collecting VAT on ebooks if you sell them direct yourself rather than through a third party – and (from what I recall) only if using automated systems to make and fulfill those sales.
As far as your VAT return goes you need to include print books (if you have any) in your sales figures even though they are zero rated for VAT (so of course you don’t add any VAT) but as far as I’ve been advised, Amazon’s eBooks don’t need adding to your VAT return figures.
Here is the info my accountant sent me some time back and I’m not aware that it’s changed since: I had a VAT inspection in January and showed the HMRC inspector this info and she seemed to agree that it was correct…
Hope this helps but please note that I’m not a tax expert or adviser! 🙂
“As I understand it the royalties paid from non UK based Amazon companies are outside the scope of UK VAT and so you will leave them off your VAT return.
So you simply set the price for Amazon and they pay you the Royalties. The Royalties are supplied where the customer is and so the VAT rate is defined by their location. The VAT aspect is that they charge 3% on supplies from Luxembourg rather than 20% from UK which you would have to charge if you supplied direct to your customers.”
Hello. I have had uk royalties for many years for a sports book and done self assessments for years. I now get only 60 to 80 pounds a year from it. Anyone ever donated their royalties to charity or close their account with the publisher direct. I no longer want to keep doing self assessments each year for this type of sum. Any advice?
This was super helpful, thank you
Thanks, Darran – do see my last comment to the previous respondent above re possible slight change to the notification process as I’ve not yet found time to update the page. Karen
Terrific, helpful post. Thank you, Karen
Glad it was helpful, Vaseem — one thing; the process for notifying self-employment may have changed, especially if you don’t expect significant earnings. I have a note about this from a tax expert colleague who follows this blog and need to update this page about that. I’ll try to do this this evening, however (failing that) if you call the self-employed helpline I’m sure they will bring you up to speed. From recollection the change makes life simpler, not harder!
Thanks so much for your detailed and considered response – this pretty much chimes with what I felt, but I’m still relieved to read your words on this. It’s definitely not something I’d want to be careless with, and I’ll definitely follow your advice.
I wrote to HMRC informing them that my ‘business’ had ceased trading on 31 March, and will complete a final return this year. Accordingly I have unpublished my three Kindle titles. Do you know if this is all that’s necessary to close the business, or is there a procedure with Amazon to actually delete one’s account?
My real worry here is that HMRC believe (as I do!) that my business has closed, and I want to make sure that it really has before I send my final return. In other words, I have a slight concern that even with zero sales, and no titles available on Amazon, the business still technically exists, and that I could be severely penalised for failing to send a return next year.
Hi John — I’m not an accounting expert but if you were operating as a sole trader and completed a Self Assessment return last year but have now told them you’ve stopped that should do it — unless you have other income (eg from property or substantial investments) that requires you to complete a return but I think you’d have mentioned that if you had. However HMRC can be notorious for their systems taking time to catch up with themselves and so I suppose the worst that could happen is they send you a Notice to Complete a Return next year (I assume you completed your return online?) in which case I would call or write to them again to explain. This all said I think if you wrote at the end of March you could probably try calling them and ask them to check your record? This page has contact phone numbers — as well as an online form you can submit. https://www.gov.uk/government/organisations/hm-revenue-customs/contact/income-tax-enquiries-for-self-employed I hope that helps but I’m guessing you’ve got nothing to worry about! It’s only limited companies that need more formal winding down as far as I understand it. If you had been paying any NI Class 2 contributions those will now be collected via Self Assessment from the next tax year I believe, so even if you had a DD set up for those, HMRC has said no action is needed to stop them (see http://www.tax.org.uk/tax-policy/newsdesk/2015/class_2_NIC_reform_changes ). I’m not a tax adviser so do call one of the numbers if you’re at all unsure 🙂
Hi again John — regards the Amazon account, I think it takes a while for records to fall off the system but why not email them via the Customer Services using the KDP or CS contact details to check? I’ve never unpublished so don’t know how it works!
As far as HMRC seeing you still on Amazon I suspect that unlikely! But as long as you have records to show that you unpublished I’m sure you fine!
If there is a serious chance of earning significant income on book royalties, being self-employed may leave you paying far more tax than if you channelled it through a limited company. Absolutely seek advice from an accountant.
Thanks for the observation, Brian. I’m sure you’re right. Any writers in danger of earning significant sums should get an accountant’s advice about the most suitable business structure. 🙂
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This is very helpful indeed. Thank you
Hi Karen – a really useful post and follow-up discussions on here.
I work full-time and am fortunate enough to have a job which just takes me into the 40% tax bracket. The book I am going to have published is a history one and has involved a lot of trips to different places to visit archives / conduct interviews etc. I have thousands of pounds worth of hotel / meal / petrol receipts. Would these be written off against any book advance and royalties I receive to ensure I pay no tax? Thanks
Hi John – I think you’d need to ask that question to an accountant – or call the HMRC self-employed helpline if you don’t use an accountant. I’m afraid I’m not a tax adviser. Do let us know what they say – I’m guessing there could be a limit on how much you could claim back given that you’re talking about so much money, but what do I know! Good luck!
Thanks Karen – to clarify I have a decent day job. The writing may earn a couple of thousand in a year which is easily swallowed up by the expense in finding the information. As you say, I’ll consult an accountant and update.
Excellent post! Some commenters asked how soon one should register one’s business. HMRC advice is within 3 months of starting your business. I would wait until your book is published and you have some income from it beforehand.
I’d broadly agree with that – though technically HMRC might beg to differ. I suppose the only downside is having records of expenditure (eg book cover etc) that pre-date the date you registered as self employed. I’m not an accountant though – maybe that wouldn’t matter! Oh and be sure to register for low earnings exemption to start with! 🙂
Hello, Karen and Helena.
I’ve just been reading through this informative post. I recently registered (I think) with the HMRC. They sent me out a unique number and I now have access to using their site. However, I’ve been trying to do ‘Self Assessment’ using the online method, but I don’t really understand some of the questions let alone which parts of of the form to fill in. I was wondering if you could help me understand some of these things.
To start of, I’ll just give you a little insight on what I do. I’m new on book publishing and publishing on Amazon. I published my first and currently, only book last year October. The amount I’ve made from my book in a whole year is just enough to by myself a sandwich without the soft drink. I have a day job (retail) working 28 hrs so I’m employed.
My questions are:
The ‘Self Assessment’ form asks if I’m employed or self employed. Which should I be selecting? I’ve already gone part way through the application as ‘self employed’ selected. Have I selected the correct option?
At the moment, I am at a crossroads with the filling in of the for as it’s asking ‘I am a farmer, market gardener or a creator of literary or artistic works and I wish to claim averaging adjustment.’ This is where I stopped. I have not put anything in this section yet as I’m not sure what I’m doing at this point. Do I need to fill this in? Did you or any other writers you know need to fill this in?
Any advice you have is welcomed and appreciated.
Hi there – I am pretty sure you would select ’employed’ to start with and then somewhere early on will be asked if you also want to declare earnings from ‘self employment’. By ticking those boxes it will make sure you fill out all the right pages – because you are both employed and self-employed. BUT if I were you I would call the self-employed helpline and check. When you complete a tax return it wants to know about *all* of your income from all sources s. I’m afraid my accountant now does my tax return so I can’t remember how the pages go! Also, make sure to ask about filling out the Small Earnings Exception form – so that you don’t have to play Class 2 National Insurance. See what I say about this above. You might also ask them if you need to register at all (and therefore complete a return) if you’ve really made no money at all – ie ask whether you can wait and only register if you do make money. But only they can answer that. Best of luck with it – here is a link to their phone line numbers. https://www.gov.uk/government/organisations/hm-revenue-customs/contact/newly-self-employed-helpline
I was wondering if you could help me. I recently read your
info on EIN/ITIN which I may say was very very helpful.
However I have one question which I hope you can answer.
I am a UK citizen who now has a EIN number from the IRS. I have already registered with HMRC
too as a sole trader.
My ebook is currently selling on Amazon Kindle.
My question is, once you have an EIN number what happens then?
Do I need to contact the IRS every year to declare how much I’ve sold? Do I need to fill out any paperwork?
I hope to hear from you soon.
Kevin Lallah aka Max Brossin
Hi Kevin – I am so very sorry for the delayed reply. I’m not sure how I missed it (although it really belongs in my post on Tax on US Royalties!).
No you don’t need to fill in a USA tax form each year. But you do need to complete this tax interview from the looks of things: this is so that Amazon can confirm to the IRS that you have a valid EIN (which is a form of TIN…!) . When I first self-published to KDP the process was slightly different and there was no online interview – instead we had to send a paper form all the way to the USA. But it looks as if that has changed. I suggest you look at this page and follow the instructions – I think I have heard that this works okay >> https://kdp.amazon.com/help?topicId=201274750
Best of luck!
I forgot to thank you for the response you sent me a few months ago. However I do have a question. I received a -1042-S FORM through the post last week. This was for the period 2014 from the IRS. Any idea what I’m supposed to do with this?
Thanks for such a helpful article and Q&As. Could anyone tell me what is the correct way for royalty payments to be dealt with using traditional accrual-basis accounting? If, for example, I received a payment on 30 April 2014 (from sales in the previous tax year), would I include it in my 2013-14 tax return or 2014-15? Since no invoice gets issued in these circumstances (and there’s no way of knowing in advance the amount of the royalty payment) does that mean the tax point is when I actually receive the cash?
Can you just clarify something please. I am in work, not self-employed, work for a Company. Do i contact HMRC and tell them i am (self-publishing) a book, i have no idea of how many i will sell maybe 10 or a 1000!!! How do HMRC know how many i am selling? Or do they just ‘charge’ me a flat fee.
You are in effect setting up in businesses as a self-employed sole trader to sell your books (with a view to makig a profit) and so you need to register as self-employed with HMRC. You need to do this even if you are already employed because you can be employed and self-employed at the same time.
If you are self-employed then technically you have to pay class 2 National Insurance contributions (NICs) and complete a self assessment tax return each year – on the tax return you include your income from employment, any income you get from savings and investments and (on the self-employment pages) your income from your book sales. You then get taxed accordingly based on your overall income.
With regard to Class 2 National Insurance, there is something called SEE (small earnings exception), which you can apply for if you are self-employed and don’t expect to make much income – I’ve just checked and the earnings limit for this is £5,885 for 2014-15- ie you don’t have to pay Class 2 unless your income from book sales exceeded this amount in the tax year. But you have to complete a form to be exempted from it. See here: http://www.hmrc.gov.uk/working/intro/class2.htm and the form here: http://search.hmrc.gov.uk/kb5/hmrc/forms/results.page?qt=CF10
The above all said, for your own peace of mind, I would recommend that you call HMRC’s self-employed helpline on 0300 200 3504 and explain the situation and ask what they recommend you do and then (for everyone’s benefit that comes to this blog) leave a note here by replying to my comment to tell us what they advised you to do. One thing that is on my mind is I’m not sure how long you can be self-employed before having to notify HMRC. They may advise you not to register as self-employed until you start getting sales from your books….which means you can test the market before going through the process…
Good luck with it and let us know what they say. Here is a link to an article on the fact that you can be both employed and self-employed at the same time…http://www.hmrc.gov.uk/working/intro/employed-selfemployed.htm
Hi, this is about not registering until you start to get sales from your books. I called the HMRC number and they directed me to the website for registering as self-employed. And when I checked online, I found that you only need to set up as a sole trader, if you’ve earned more than £1,000 from self-employment between 6 April 2018 and 5 April 2019 (or your relevant tax year). Thank you for the helpful blog article!
Thanks for the clarification, Folakemi 🙂 I’ll update my notes above to reflect this. These things change all the time!
Karen, thanks very much for your vastly helpful posts on US royalties and UK tax for authors. I am now starting the process of getting my EIN following your guidance, and am reassured by what you say above about treating book advances/royalties as business income. I’d love to ask a follow-up question that’s not about self-publishing, in case you have a a view. I have a book deal with Random House in the US, and with other publishers in other countries including the UK. I have a small UK-based limited company that I was proposing to use to process the book income (as you suggest above), as the book and the business are intimately linked. I wasn’t sure if you had a view on the right approach to contracting for that. Should each of the contracts be in my name as a director of the company, or in my company’s name? Are there any ‘watch outs’ either way that you know of? I’d be grateful for any thoughts you have.
Hi Cazbah – I’m afraid contracts are outside my area of expertise. Are you a member of The Alliance of Independent Authors? If so they will offer you free advice. Follow the link above in my menu to find out more about them and join them if you wish. Otherwise if you have an agent or accountant they may be able to advise? Sorry I can’t be of more help!
Hi, would I have to pay tax on potential book royalties if I am on benefits? I don’t pay tax because of benefits and that is only my only source of income. Also, would the royalties possibly affect my benefit?
Book royalties would count as taxable income. However you only ever pay Income Tax if your total income in a tax year (which runs from 6 April to 5 April) exceeds the Personal Allowance for that year. The Personal Allowance is a set amount of money that every individual can earn before they pay tax. For 2014-15 (ie starting on 6 April this year and ending 5 April 2015) it will rise to £10,000 for most people (it’s currently £9,440). (If you’re elderly you get a bit more.) If you are receiving benefits that are means-tested (ie the amount of benefit you get depends on your income) then of course they could be affected if you are incredibly lucky and have a bestseller 🙂 or earn a good income from your book sales. Sadly the reality is that many authors only make a very small income – so it will really depend on what level of benefits you get already and how well you do with your book sales! To understand more about the Personal Allowance and Income Tax (and the relationship to benefits) I’d recommend you read this guide over on Gov.uk https://www.gov.uk/income-tax/overview **Please note that I am *not* a tax adviser! I simply happen to know quite a bit about the basics as I’ve done quite a lot of work in my day job commissioning content in plain English on tax and money. So if you are at all unsure call HM Revenue & Customs and ask them.** Best of luck with your writing!
If he is earning the bulk of his money via PAYE I don’t think he needs to register as self employed. I received royalties for years while employed and just entered them as additional income – on the advice of HMRC. They were only a few hundred pounds per annum but if joe checks, I suspect 1400 is still low enough for a high rate tax payer to just count as extras.
Thanks for the tip, Alan – hopefully Joe will see this and check the facts with HMRC. Joe, if you do please leave a reply here for everyone’s benefit 🙂
Joe, you need to register with HMRC as self-employed and complete a tax return online by 31 January 2013. This return should include all your income, including your PAYE income and tax you’ve paid through that. (Karen, I hope you don’t mind me jumping in here).Helena
No problem at all, Helena! I thought as much, though I had wondered if there might be a floor of earnings below which HMRC might say ‘don’t register yet until you know that you’ll be getting some royalty income to speak of…’. This said, I wouldn’t count Joe’s royalties as low in the scheme of the author landscape…. Joe – the good thing about self assessment online is that it adds up all your figures for you 🙂 Oh and this Jan’s deadline for the return is for sales made up to 5 April 2013. So if you started earning after that date you don’t need to complete a return until after 5 April 2014 – but you do need to have registered as self-employed with HMRC. K
Thanks for the blog. I am employed full time and my main income is at the higher tax bracket but my book royalties is only around £1400. I guess I need to declare as extra income in my self assessment. Right?
Hi Joe – yes that’s right, but I’d suggest you call HMRC self-employed helpline and ask if you need to register as self-employed also. I’m pretty sure you do – even if the income is small. (You can be employed and self-employed at the same time…) You can at the same time ask about being waived from paying Class 2 NICs due to low self-employment income.
A very useful post, I’ve just retired from a 40 year corporate career and want to turn my hobby of writing into something that earns pin money to top up my pension. I wasn’t sure what my tax/employment status would be if I did that; this has helped clarify things a lot. thanks.
Glad it was useful, Alan. (Sorry for late reply!) Karen
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Helen, can anyone help me? My publisher in France owes me royalties, but say I need to send them a tax exempt form signed in the UK to prove residency, otherwise they will take 30% of my royalties. When I went to my local tax office they said they no longer do it, but I need to go online to their site. What a joke. Totally impossible to find the information in the maze of links on their site. Can anyone help me locate link, or advise otherwise?
Excellent post and brilliant advice. It’s also useful to note that the 31 January 13 deadline for online tax returns refers to income earned in the tax year which ended 5 April 12, so no need to panic yet if your earnings have come through after that. If you are looking for an accountant to help you with your SA tax returns, I am an HMRC tax agent and licensed member of the Association of Accounting Technicians (AAT) as well as an ALLi member! I have many clients in the creative industry, so I understand the problems of fluctuating incomes and can help with minimising the tax burden during the slimmer years. Email email@example.com
Thanks, Helen, for your additional helpful comments!
Very useful! It might also be helpful for people to know that – if they start to have reasonable earnings and I would say that’s pretty much anything over the tax threshold, they should consider employing an accountant, albeit with the proviso that they search for the right accountant. I don’t think I’ve ever been in the ‘seriously high’ category, but some years I have done pretty well between plays and publications and having an accountant has been a big help. You can find accountants who will charge a very reasonable fee, allow you to pay monthly, up front, so it’s relatively painless – and will clarify exactly what you can claim in expenses. For instance if you work from home, you can claim a percentage of things like electricity and heating so long as the room you work in also has other purposes – and in a home, it invariably does. And if you can find yourself an accountant who has a good, honest reputation with HMRC you can save yourself an awful lot of trouble – and money. My advice to people on Class 2 contributions would – like yours – be to keep on paying it. Don’t opt out. The cost is minimal and believe me, age creeps up on you a lot quicker than you realise!
Thanks, Catherine – I’d entirely agree. I use a one-man band tax accountant – couldn’t manage without him, especially as I have a mix of children’s writing and professional writing to contend with!