First Published on: https://pentoprint.org/friday-features-writers-money/
Writing is a creative endeavour. To sustain it, there is a need for writers to be financially savvy and have knowledge around the economics of writing. Writers don’t need to enjoy it, nor do they need to be good at it – there are experts for that – but to have a basic understanding is important.
The journey to becoming a successful writer can be arduous and long. While it may seem that only getting published and selling a million copies will make you any money, it’s a myth. There are many options available to writers to make a living.
Although this is not an exhaustive list, here are a few options:
- Enter competitions: Some have cash prizes, some publish your work and, as a bonus, it looks great on your CV if you win.
- Apply for grants: There are grants available to writers for various projects which you can apply for. Research foundations and what they are offering grants for – some are very specific as to the nature of the writing. Others are broader and only specify a genre, for example. If you meet the criteria, this could allow you to focus on your writing.
- Freelance writing: This could be articles for magazines or newspapers, or translating work. You can review job adverts, contact commissioning editors and pitch your ideas, follow key hashtags on social media, network, or join freelancing platforms to find work.
- Become a ghostwriter: If you are looking to make money but not garner attention as a writer, this could be a lucrative way to earn, depending on which industry you work in. You could write books, speeches, articles, etc. for others.
- Blogging: Start a free blog and monetise it through advertising, sponsored content, affiliate marketing and more.
- Copywriting: Write content for businesses to reflect their brand identity in the promotional literature, both offline and online. It could include product descriptions on websites, emails to customers, newsletters, blog posts and so on.
- Create and sell e-books: It’s straightforward to self-publish an e-book and can lead to passive income (once the book is written, of course).
- Take up a role as a technical writer. This involves writing instruction manuals and/or teaching material and involves research, becoming an expert of sorts in the area you are writing about.
Once you start making money as a writer, even a small amount, it’s imperative you get the ‘business’ side of your writing correct.
Firstly, you have to decide the legal entity of your business. Do you want to run it as a sole trader, or a limited company? A sole trader pays income tax on profits and Class 2/Class 4 National Insurance and is an extension of the writer. A limited company pays corporation tax on profit and is a separate legal entity. A limited company may be better protected legally and more tax-efficient (depending on how much you earn) but it would also cost more to run. Some aspects, such as creative averaging, are not available to a limited company but are to a sole trader. (Creative averaging is a special relief available for creators where they can add two years profits and be taxed on the average of those profits if certain conditions are met. This can help with fluctuating results.)
Ensure the copyright of the work is correctly attributed if you set up a limited company, including on the contracts. If you set up a limited company after you have written a book, the copyright can’t just be given to the limited company, but would require valuation and tax to be paid. Consult professional advisors to ensure the matter is handled correctly, as it could otherwise lead to complicated tax issues.
A sole trader will complete their income and expenditure in a self-assessment form annually to HMRC. A limited company must file annual accounts to Companies House & HMRC and corporation tax returns to HMRC. However, the writer must file a self-assessment form annually to HMRC as well, to declare any income they take from the limited company in the form of Salary or Dividends.
There are several expenses writers can claim, either as a sole trader or a limited company:
- Agent commission
- Research expenses – which may include travelling to locations, interviewing people, etc.
- Motor expenses (mileage)
- Accountancy fees
- Technology software
- Fees to editors, designers, publishing platforms
- Literary festivals
- Marketing expenses
- Subscriptions to journals or membership organisations
- Books and periodicals
- Use of home as office
- Salary payments
- Printing, postage and stationery
The main criteria is that the expense is claimable only if it was wholly, exclusively and necessarily incurred for the business. If there is ambiguity, ensure a percentage of the cost is claimed to account for any private element.
The current VAT threshold is £85,000, i.e., VAT registration becomes compulsory once sales exceed £85,000 in the last 12 months (this is a rolling period). To calculate sales, ensure you take in your gross amount prior to any agent commission. Also, if you are a sole trader and you have other self-employed income, that would count towards the £85,000 too, as the VAT registration is for the person. There is a penalty for registering late for VAT.
It is possible to register for VAT voluntarily before this period. Usually, it’s done to reclaim VAT on your expenses, but factor in what you would pay to get your VAT done and if it would be worth it to do so.
The above are some of the considerations a writer should keep in mind while pursuing a writing business. Whether you earn a few hundred or a few million, or anything in between, every writer should be cognisant of the tax system and what options are available to them. Seek professional help for the best advice for your circumstances.
To find out more, join our ‘money savvy’ Readfest workshop on 11th September. Sign up here: https://pentoprint.org/eventbrite-event/readfest-your-money-writing-bids-to-get-funding/
Disclaimer: Whilst this article is for writers to gain some knowledge around the money aspect of writing, it doesn’t necessitate specific advice, as individual circumstances differ. Please ensure proper advice is taken from a qualified accountant prior to any action taken.
© Palak Tewary, 2021