Tax & benefits for authors

We're campaigning for a fairer tax and benefits regime for authors.

The only thing that hurts more than paying an income tax is not having to pay an income tax.

Thomas Dewar - Income Tax, Pay, More

Current tax and benefit rules do not work well for authors. Many authors hold a number of jobs to sustain a creative career, and need to navigate a complex, bureaucratic tax system. Those who are registered solely as self-employed do not receive holiday or sick pay, or other employee benefits such as company pensions. A 2016 European Commission study on authors’ remuneration which surveyed authors, journalists, translators and illustrators across Europe found that UK writers had less protection than in many other countries. For example the AGESSA scheme in France allows authors to receive benefits such as sick pay and unemployment benefit, with publishers and other content users making contributions to the fund. Similar provisions apply in Germany.

Universal Credit

Emerging and struggling authors face difficulties in claiming benefits. Under the old system, which is now being phased out and replaced by Universal Credit, some authors with low earnings could claim Tax Credits to supplement their income. This enabled them to dedicate more time to their writing, ensuring that they could continue to write as a profession.

But the introduction of Universal Credit means that the self-employed must meet the “Minimum Income Floor” to receive benefits. This is equivalent to the National Living Wage for most working-age people. Given the median annual income of a professional author is £10,500, which is well below the National Living Wage, many authors will lose their entitlement to benefits under Universal Credit.

Furthermore, a self-employed worker’s entitlement to Universal Credit is assessed monthly. This will make it even harder for professional writers to reach the Minimum Income Floor and claim Universal Credit, as authors’ incomes are not stable and tend to fluctuate from month to month.  

We are calling for reforms to Universal Credit so that it does not penalise self-employed creators on low incomes. We also believe it should deal with “lumpy” incomes by basing payments on average incomes over two years. This would ensure that authors are paid benefits in lean periods and do not fall out of benefits on receiving an advance or royalty cheque.

Making Tax Digital (MTD)

Under the Government’s MTD proposals, any business or self-employed worker whose annual turnover exceeds £10,000 would have to file quarterly returns online. The Society of Authors has long argued that the minimum threshold is far too low, and would place an administrative and financial burden on lower paid workers.

Self-employed workers and businesses earning above the VAT threshold (currently £85,000) will have to start filing quarterly returns for VAT purposes from April 2019. It will be extended to self-employed workers earning below the VAT threshold from April 2020 at the very earliest. We will be keeping a close eye on HMRC’s next steps and ensuring that any future reforms don’t damage authors’ interests.

National Insurance Contributions (NICs)

In September 2018 the Government announced that it was dropping plans to abolish Class 2 NICs. This is good news for the lowest paid, but we question why HMRC has completely rolled back plans that would have benefited 3.4 million people.

Class 2 NICs are paid by self-employed workers earning more than £6205. Those earning below this threshold can make voluntary Class 2 contributions of £2.95 a week to access benefits such as the state pension. Had Class 2 NICs been absolished, those earning below the threshold could only have made voluntary contributions through Class 3 NICs, which are £14.65 a week. This adds up to £761.80 per year, a fivefold increase on the Class 2 annual contribution of £153.40.

The SoA submitted evidence and met with HMRC officials, in order to express concern that this change would disproportionately affect authors and other creators who are already struggling financially. We are pleased that HMRC has listened to concerns of the lowest-paid earners. However we urge the Government to continue to find an approach to National Insurance which simplifies the system for everyone, whilst protecting the pensions of the lowest paid.

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