If you're an author who also has a day job, what do you do around taxes?

[TR888]

Just wondering as I'm looking at self-publish a book in the near future. I'm a high tax payer in my day job so any income I make would in principle be taxed at the top rate - I'd like to avoid that if possible.

Bumping it up!

I’m not sure you can avoid it. I’m in same position re my day job and pay tax on my author earnings at top rate. There are expenses related to writing that are tax deductible, but other than that you pay taxes like on any other earnings. You could look into setting up a limited company but I’m not sure whether that will solve your problem.

Thanks. I hear some authors have self-employed status (in addition to their day job) and that's favourable taxwise. Maybe that's only worth doing if you make a large income?

I have self-employed status, because I legally have to report my author earnings. Makes no difference because it's total income that affects tax bracket.

Maybe forming a limited company would offset some of that? I'm not sure.

It entirely relates to your jurisdiction, OP. If you are based in England/Wales then the replies you have have broadly covered it. You pay your taxes and if you are self-publishing through Kindle then you may be asked for some information that presumes you are based in the USA.

In the UK, you can register as self-employed. If you have significant/material income then you will need to complete a self-assessment. You should keep track of relevant expenses to legitimately reduce the amount of tax.

If you plan to be wildly successful and want to reduce the tax you pay, you could start a company and manage things tax-efficiently. You could even accrue the revenue in the company and defer drawing income until your day job income reduces or you retire or have family members as share holders and all the other tricks. Most guidance, including SoA, indicates the transaction costs make this unfeasible for all but the most successful authors. Companies need to file annual accounts and incur other expenses and it would be easy for 99.9?% of authors to lose money through a company.

You might want to familiarise yourself with the average income for a self-published book. I admire your optimism and willingness to plan ahead but the exceptionally few self-published authors I know who earn significant sums do so on the back of many books/series.

Good luck but as Mrs Beeton might have said, first catch your .....

Some useful guidance for UK-based authors. Jurisdiction is key.

www.societyofauthors.org/getmedia/fe7fa7f2-8260-4026-b762-f3e4e0ce9c66/Tax-deductible-expenses-2018.aspx

HW Fisher have some sector expertise and their advice is shared by the SoA.

www.hwfisher.co.uk/specialisms/authors-journalists/

If in the UK and depending on your income and pension provision from your 'day job' you might also be able to use pension contributions to reduce income tax payments if that is a priority to you and immediate income isn't.

Hi, thank you very much for your advice. I'm sorry if I sounded like an idiot, I don't think I phrased things properly. In any case, your advice is very useful and much appreciated.

There's no need to apologise, OP, and you didn't sound like an idiot. I'm sorry if I made it sound I thought you did. Unfortunately, most authors don't make a decent return though a few do. Some posters on these threads (possibly @themental though would need to check) seem to make a great living from self-publishing and her? insight and advice about self-publishing always seems to be well-informed and exceptionally useful to me. I've learned a lot from them.

It is relatively easy to start a company but it's worth thinking through the long-term costs. Unfortunately, it looks like the SoA guidance is now behind the equivalent of a paywall but I vaguely recall it seemed to say relatively/very few authors would receive a net benefit from running a company.

Good luck (I genuinely mean it).

FWIW, OP, the one person I know is an idiot is me. I've over two hundred novels to be with casts all shouting in my head and I don't make enough progress in telling their stories.

No help at all to you but I'm an academic and have a book out and I'm putting the royalties towards research costs by putting them into my department expenses account (so I don't pay tax on them).