When to go self employed

Laevus

I've been writing like mad lately and the day I finally start to send out some short stories or self publish an anthology is fast approaching. After reading in the recent edition of Writing Magazine (Apr 2014) the article on tax and and accounts, I'm wonder when I should take the plunge and set up as self employed.

I'm already paying out for things like magazine subscriptions, reference books, web hosting that all relate to my writing, but I've been doing it from my own pocket rather than through a self employed business. Having to move all that across and record it all as expenses feels like a large task and very daunting. At the moment, I have a week off work, and although I was planning on raising the daily word count, I have to admit that it would be the perfect time to deal with boring paperwork and essential future preparation.

The thing is, I'm not sure if it would be too soon.

I've not finished editing, formatting or even getting an eBook cover done for anything I intend to sell, and I have no target date set for trying to sell the first story. However, I'm aware that any artwork I pay for the cover and any marketing I do should go through the business to offset future profit.

Feeling a little lost, buried under information that all feels relevant and more than a little scared at the prospect of things marked 'business' and 'tax'.

Any advice for someone just starting out in this scary world?

snailmale

1. Continue writing like mad.

2. Maintain your obvious boundless enthusiasm

3. Send out your short stories etc. to potential publishers

4. Keep the day job until you at least have a good indication that your writing will support you.

Laevus

I've no intention of giving up the day job until I'm more than certain I've got a steady income (which I know won't be any time soon). However, I can't go from earning nothing to earning enough to quit my day job over night.

Unless I've misinterpreted what I've read (highly likely), if I write a story and sell it, I have to declare that I've done so as I've created something with the sole purpose of generating income from it. Therefore, I have to put it through a company with all the relevant accounting paperwork.

It's trying to run the self employed at the same time as the day job that's the scary part.

For reference:
I was intending on sending short stories to magazines, selling collections on Amazon KDP and similar services. The intention was to get some feedback, a few readers and generate interest in larger projects as I work on them. I have outlines and a start on two novels, but I wanted to work on getting my name out there, however small, before setting them free.

snailmale

I shouldn't worry about the self employed bit just yet! Just get your stuff out there and if you should be fortunate enough to start making serious money, then is the time to think about the tax man.

It's not all that easy to place short stories, a great many publications don't actually pay for submissions, especially on-line mags and even those that pay are pretty miserly with their rewards.

I'm sure that other people on this forum will share their experiences with you.

Keep writing, start subbing, stop worrying and good luck.

Tiny Nell

What sm said...

I've never thought of writing in terms of a business. It's more a hobby that brings in small amounts on a very infrequent basis. I think that to produce a business plan would only occur to me if I suddenly became a household name, earning vast amounts of money! What you're suggesting, Laevus, seems a lot of trouble to go to for little gain, but then I'm not a business person; I'm a fuzzy Creative Head.

I've had a couple of short story collections on kindle for a while. I earn 35p a copy. As an unknown writer you'd have to price a collection low. Have you seen how many self-published books are out there?

Magazines often use the same batch of writers for their stories. It could be a while before you 'get in'. First of all it may be an idea to get some credibility behind you by getting placed in competitions.

I subscribe to WM and occasionally buy Writers' Forum. I pay out the odd £5 to enter writing competitions. Occasionally I win something; my biggest win was £200, probably less than I've paid out overall.

It would be lovely to think of this as a way of earning a regular income, but I doubt that there's anyone here on TB who can make that claim.

For now, my advice would be to carry on writing, not worry about forms and test the waters by sending out your work. Look on the Internet for writing opportunities.

heather

If you make any money from your writing and you also have another job then you need to include it in your tax return as 'other income'. I did this for several years before going self-employed. You are right that you can't claim expenses that way, but it's going to be a small amount to begin with. In any case, the tax man won't let you offset losses against non-writing income while you are making no money from writing, as at this point they will see it as a hobby.
You can carry losses forward for a certain amount of time if you set it up as a business, but I'm not sure how you do that and whether the paperwork etc would be worth it.
So basically, what the others said. Don't waste your writing time worrying about it yet.

Laevus

I'd been looking into it so that I got it correct from the start as I didn't fancy fixing a big tax mess or getting into trouble for not declaring things properly.

It's strange, in my head the self employed route makes perfect sense, but as soon as I look at the info on declaring extra income and tax returns, my brain turns to mush.

From the sound of it, it's not worth worrying about until I start making sales rather than needing to set it up in advance. Also nice to know there's another way of keeping it above board without having to go down the route of self employed just yet, thanks for that Heather.

Thanks for the comments.

snailmale

"I didn't fancy fixing a big tax mess"

If only... ~:>

Laevus

I don't underestimate my ability to create a big mess from something with very little substance. I've seen the state of my kitchen after trying to cook.

Baggy Books

@-)

Claudia

What the others said... the only thing you should be worrying about is getting your stories accepted for publication... breaking into the short story magazine market and selling on a regular basis is not necessarily easy.

Phots Moll

Once you earn any money from writing you have to declare it. You'll need to either ask for a tax return and add it as additional income, or register as self employed. The advantage of being self employed is that you can claim back any expenses and only pay tax on your profit.

If you register before earning anything they won't let you claim against your day job tax for expenses, apparently it's considered a hobby until you make anything so setting it up in advance won't gain you anything.

The tax forms aren't really that complicated. As long as you keep proper records and read each question carefully yout tax return shouldn't take more than an hour.

Baggy Books

Totally agree - simple spreadsheet, list the expenses on one page, income on another and a third to show your profit and tax (all linked so you only enter figures once). Keep the tax in a separate account - and the profit too if you can.

I enter my expenditure as it happens and file the invoice. Same with income. I'd say that it takes me longer to faff around with my password to access the HMRC pages than to do the return. All the figures are on that spreadsheet, I just have to enter them.

It's as hard as you want to make it. Simon Whaley is running a series of articles on this topic in WM - it's very basic, but that's all it needs to be.

Chris Helme

Having been a police officer 30 years and retired 13 years ago. The one thing I did whilst writing / public speaking and self employed as an adult tutor as a serving police officer was to get an accountant. It assured me of one thing that I would not be getting a knock on the door from the tax man. That was back in 1986 and I still have the same family accountant and I claim for everything to take care of all my writing / speaking / teaching and now publishing - the bit I pay for the service has been well worth it. I have it all out on a spread sheet along with my working calendar and can see at a glance where I am and what I should be doing....It is well worth the effort...

Carol

But you were at the stage of getting regular income so it was worthwhile.

Unlike Laevus, who at the moment isn't making anything, though that will hopefully change in the future...

Liz

You have to declare anything to the tax man, not just serious income. So if you make anything at all, it has to be declared.

Carol

Liz, I was commenting on having an accountant...

Baggy Books

LOL! I was just about to post that.

You don't need an accountant to do it for you - but it does depend how complicated one's finances are. Mine are straightforward, so I do my own bits and bobs.

Baggy Books

HMRC run workshops and have advice on their website.

http://www.hmrc.gov.uk/startingup/bus_sup.htm

http://www.hmrc.gov.uk/startingup/help-support.htm

Liz

I was answering Laevus, Carol, didn't read any comments after that... on my way to dinner!

Laevus

Yup, I was going to get an accountant when I went self employed to at least make sure I was going in the right direction if nothing else.

I don't think I'd have any trouble dealing with my own accounts when I get started, it was more the order that I needed to set things up in. First order will be getting things finished and then getting it out the door.

Jan

..... I have to put it through a company with all the relevant accounting paperwork .....

As fellow Talkbackers' have already observed, in the politest sense, it is likely to require many months {years} of fortitude before your effort generates sufficient income to warrant creating any form of company structure.

By all means keep a spreadsheet account of all your expenditure, just don't become dejected upon realising how much money 'disappears' in telephone, postage, travel and material sourcing.
First stage of independence could be declaring your 'hobby' as a self-employed occupation in your own name. That enables all receipts, even milk and coffee, to be set against payments received for articles etc., for which you have been fortunate to gain payment.
However, formalising an actual self-employed status will also incur necessary contributions toward National Health Insurance and other annual outgoings to justify claim of your writing career being a legitimate business.

You may imagine how such expense will only burden your outgoing payments before sufficient remuneration is generated to balance that spreadsheet record.

At the moment, it seems best to concentrate on juggling your words into readable compilations. Enjoy your creations' and good luck in finding others wishing to pay money for the pleasure of sharing your imagination.

Keep your faith and savour the journey,
all the best with every enterprise that attracts your attention,
Jan.

Phots Moll

Jan, you can't claim food or drink as an expense.

danfango

Yes, you have to be careful what you claim. You can't claim for the teabags and biscuits you use at home, but if you attended a writers' conference and bought a cup of coffee and a sandwich for lunch, that would be allowable. The main benefit for 'hobby-level' writers (like myself) is that you can offset competition fees, postage costs, paper, and printer cartridges, as long as they are mainly used for writing. You'd need to estimate a proportion of the printer use that was for writing if it was also used to print out family photos, the kids' school projects, etc. Mostly, it's common sense - if it wasn't spent specifically in the pursuit of writing income, it can't be counted as an expense.

I've been self-employed for the day job for five years, and I quickly added my writing income (mainly competition wins at the time) as another income stream. It is easy to keep track of your expenses once you get into the habit. As others have said a simple spreadsheet should be enough. I find it useful to look at the categories used by HMRC and allocate the expenses accordingly as they come in, rather than trying to do it all at the end when you're filing the tax return.

You definitely don't need to set up a limited company at this early stage!

Jan

Jan, you can't claim food or drink as an expense.

Over generalising. True sustenance is not an allowable expense but when entertaining people associated with one's writing work, research expeditions, even travel and accommodation costs to attend an area forming landscape or cultural practices of the storyline {not that one would deliberately enjoy such events as one does a holiday ......} the relevant portion of costs, as Danfango observes, are allowable in the annual tax claim.
Just be aware of the difference between avoidance and evasion, under tax laws.

Phots Moll

I'd urge anyone who is unsure about anything tax wise to check the hmrc website or contact them directly (they're usually very helpful) rather than rely solely on the interpretations of anyone here.

danfango

Yes, definitely.

There's a lot to wade through on the HMRC website, but the rules are (mostly) clearly explained. If you don't understand something, the helpline is usually pretty good. In my experience you'll probably be waiting to speak to somebody for about half an hour but they can generally sort out your query there and then.

Kayess

You don't have to register as self-employed if you aren't making any money from writing, but you can claim expenses if you do. Whether your intention is to charge for your work or not seems to be the main point as far as HMRC is concerned. I have found the website really useful. If you still have a copy of September 2013's Writing Magazine there's a whole section on the money aspect of writing (including, I confess, a feature by me).

As accountants tend to charge according to your earnings, in my experience they tend not to be too interested until your writing brings in an income. However, doing simple book-keeping isn't usually as difficult as it looks. I'd make sure you set aside a set time each month to keep everything up-to-date otherwise it can become another excuse not to get on with actually writing.

datco2014

Hi lave us I concur with most on here I wouldn't worry about that yet - just keep a note of all your outlays in case one day you do earn significant money - u can then offset the outgoings against this - the only issue might be if:

1. You are on the verge of being a higher rate taxpayer (HRT) from your day job if so you need to be careful you don't stray into this by your writing earnings but again not a huge issue unless u start earning big bucks from writing.
2. Again if ur close to earning £50k from yr day job any writing earnings could be added to your overall income and reduce yr entitlement to family allowance thankfully not many of us need to worry about that!!