How/when to pay tax??

[ginmakesitallok]

Stealth boast that DP is getting a book published But serious question about what he need to do about paying tax on any royalties he gets? Jumping the gun a bit I know - but it's already sold about 300 copies, and not published yet. We've only ever done PAYE - so what (and how) does he have to tell the tax man?? Can it be done via publisher??

Get an accountant

Tax is usually paid in 3 installments consisting of two payments on account and then a final balancing payment by January 31st of the year following end of tax year.

However I believe that royalties may have special rules extended to them ... I'd at least speak to an accountant for advice if nothing else.

presumably he will get the royalties as untaxed income; if so he will need to do a self assessment tax return for the year the royalties get paid to you in (ie 2012/13 if paid between April this year and April next year), the self-assessment process tells you how much tax he owes; the self assessment form has to be submitted by 31st Jan following and any tax owing has to be paid by 31st Jan following.

So if he gets a royalty payment in October this year he could do the self assessment in May 2013 but not pay the tax until 31st Jan 2014.

I think.

Don't want to get an accountant if he just ends up with £7.45!! Does he have to declare it even if he only earns peanuts? Purple - from what you're saying it's not something we need to worry about just now (just need to remember to keep some back if he ends up a best seller??!)

I'm pretty sure that the publisher will deduct basic rate income tax from the royalties and pay them over to HMRC for you. Then he will need to declare the royalty income on a tax return and also declare the tax paid on these. So it works like interest.

I say 'pretty sure' rather than 'sure' because although I am a qualified accountant I don't deal with personal tax issues anymore and haven't done for some years....

Ceegeebee - It is not usual for royaltie to be taxed at source.

OP - can be very expensive to not seek proper advice from the outset. If you are looking at relatively small amounts then call HMRC on 0845 900 0444 and they will advise.

Although Purple is correct you should still get some proper advice re your own specific situation. There are a myriad of differentials when dealing with non trading income. If dh becomes an overnight sensation a la Fifty Shades you will be glad you did

call hmrc - they won't bite!

In very basic cases such as this it is entirely possible to do your tax return yourself reading the guidance notes for the return. I did this for several years until my situation got the the point where it takes me over 10 hours to prepare the info to send to the accountant.

UK Publishers don't deduct tax from royalties paid in the UK.

If he already fills in a tax return, enter the amount in 'Other Income'. If not, call HMRC in April when he knows how much he has earned. If the amount is small and he also has PAYE earnings they may collect it through his tax code, otherwise you won't have to pay anything until January 2014.

If the amounts are small that is all the advice you need. If the amounts are large, particuarly if they will take him into higher rate tax (or he is already there), you should get an accountant with royalties experience. If you call HMRC they will help you pay as much tax as they think is due, that is their job; if you call an accountant they will help you ensure you pay only the amount of tax that you have to pay.

Thank-you. Think we'll wait until we see how sales go before we decide if he needs an accountant. If he does how do we go about finding one with royalties experience (already in higher tax band)

You could try word of mouth, your publisher or a professional association such as the Society of Authors.

It might make sense to talk to a couple now first to get an idea of potential costs and savings and second to see whether it is worthwhile taking any preemptive actions - depends on both your tax positions, unused capital gains thresholds etc.

I had a client who had some adult education books published. the royalties were declared on her tax return each year, quite simple to do