Ah, the life of an author – hours spent crafting stories, wrestling with deadlines, and celebrating (or crying over) book reviews. But here’s something they don’t tell you in creative writing class: tax is a thing, and you have to deal with it.
If you earn royalties from your books, music, artwork, or even software, the taxman considers this trading income. And like it or not, that means you need to report it properly.
But don’t panic! I’m here to break it all down in a way that won’t make you want to throw your laptop out the window. Here’s everything you need to know about tax for authors.
How are authors taxed?
If you’re an author (or any kind of creator earning royalties), your income is considered trading income. That means:
- You’ll need to declare it on your tax return if it’s over £1,000 a year. (*If your royalties are less than £1,000 a year, this is covered by the trading allowance and you don’t even need to tell HMRC about it unless you are doing a tax return anyway.)
- You might be able to deduct expenses to reduce your tax bill.
- You might need to register for VAT if your income is high enough (joy!).
And here’s a fun fact: if you’re ghostwriting, your income isn’t classed as royalties – it’s just a service fee. Which means you miss out on a juicy little tax perk called averaging relief.
Which brings me nicely to…
What’s averaging relief, and why should you care?
One of the trickiest things about tax for authors is that your income can be wildly unpredictable.
One year, you might have a big book deal and a film adaptation in the works. The next year? Silence. Nada. Just you, your laptop, and writer’s block.
This is where averaging relief comes in. It lets you spread your income across two tax years, so instead of one year with no tax and the next year getting slapped with a higher-rate tax bill, you smooth things out.
But! (And it’s a big but.)
- Averaging only applies to royalties. I.e. the income has to come from the exploitation of your copyright in your creation. If your income is from freelance writing gigs rather than royalties, tough luck – this won’t help you.
- Your profits from one year must be less than 75% of the next year’s profits. If your income jumps too dramatically, averaging might not work for you.
Still, it’s worth checking if you qualify – because nobody enjoys handing over more tax than necessary.
| The taxman has rules for what qualifies as your trading income and expenses -and you may well have plenty of expenses to offset against your income…so make sure to discuss this with your accountant! They can help you to identify which expenses do and don’t qualify for tax relief. Need help? Get in touch at [email protected] for a free consultation with one of our experienced tax accountants. |
Royalties & VAT: the bit that gets confusing
Did you know that royalty income is subject to VAT? If your total income goes over the VAT registration threshold (£90,000 as of 2025), you must register for VAT.
And just to make things extra fun:
- UK royalties vs international royalties – VAT rules differ depending on where your royalties come from.
- If you get royalties from abroad, the paying country might deduct withholding tax before you even see your money. Luckily, you can usually offset this against your UK tax bill.
Confused? Yeah, I don’t blame you. This is where having a good accountant (hello!) can save you a lot of headaches and a lot of money.
What happens to your royalties when you die? (Cheery topic, I know!)
Here’s something you might not have thought about: your royalties don’t just disappear when you’re gone. In fact:
- Copyright lasts for 70 years after your death – meaning your family can still earn royalties long after you’ve popped your clogs.
- You can assign your royalty rights in your will, so they get passed on properly.
- But – inheritance tax applies. Your royalty rights will be valued as part of your estate, which means your heirs could owe tax on them.
Moral of the story when it comes to tax for authors? Plan ahead because the taxman doesn’t take a day off.
On the other end of the spectrum, if you are the one inheriting or if you have been assigned the royalty income – meaning you aren’t the author or composer or artist who created them – then this income isn’t trading income but miscellaneous income. This means you can deduct direct costs, such as agent fees and the like, but not as many costs as if you were the author.
Selling your royalty rights
If you decide to sell your royalty rights (maybe you want a lump sum instead of waiting for trickling payments), then this usually falls under Capital Gains Tax (CGT) rather than income tax.
This is a big deal because CGT rules are different, and the tax treatment can vary depending on your circumstances.
| Thinking about selling? Speak to an accountant first. Seriously.Drop us a message at [email protected] and we’ll help you work out the best tax strategy. |
Should you be a Sole Trader, Partnership, or Limited Company?
One of the big questions I get asked about tax for authors is: “Should I set up a company for my writing income?”
The answer? It depends on your situation.
- Sole Trader – Simple, straightforward, and great if you’re just starting out.
- Partnership – Good if you’re working with another writer or creative partner.
- Limited Company – Might be tax-efficient if you’re earning a LOT, but it comes with extra admin.
There’s no one-size-fits-all answer, so again, this is another one to discuss with an experienced tax specialist (guess what? We do that too!).
Let’s make your tax life easier!
Tax for authors doesn’t have to be a nightmare – but it can be if you ignore it.
At JVCA, the friendly accountants, we help authors, musicians, artists, and creatives navigate tax, claim the right deductions, and avoid unnecessary stress.
Email us at [email protected] for a free consultation, and let’s sort out your tax.
