The Death of Chatterton, by Henry Wallis
Love and marriage go together like a horse and carriage, says the old song. Tax and money go together like glue and honey. Unless you’ve got both under control, they become a sticky mess.
The second you start earning money from your writing, you’re in business. Like it or not, that means keeping records. Writers earn a lot less than you might think—see here for the bad news—but while your dreams of sealing a deal worth millions may have to go on hold, HMRC and the IRS wait for no author.
It’s better to get a basic system of recording the amounts of money you handle well before you need it, so here are my four top tips for shrinking a painful process…
THE RULE OF HALVES
Romance writer Kate Walker gives some great advice to new writers: whatever you earn, however small the figure, put half of it straight into a separate account that’s hard to access. Don’t touch it. WHATEVER THE TEMPTATION. That way, you build up a fighting fund ready for the moment an envelope full of the Tax Dragon’s finest drops on your doorstep.
If you’re up for a challenge, you can take this one step further. From the half of your earnings you have left, put half of that into a savings account that’s slightly easier to access. You can then dip into that pool of medium-term savings for sudden, unexpected bills. In other words, the “average” writer’s earnings of £600/$1,000 per year becomes only £150/$250 of actual fun money. To prove I’m not completely made of stone, I’ll let you do what you like with that.
|All Contributions Gratefully Received http://bit.ly/1GQPIIq|
ENVELOPE IT ALL
Take twelve large, plain, white business envelopes. Label one for each month of the year. Every time you buy stationery, pay your RNA or RWA dues, renew your web hosting, get an advance or some royalties, put the receipts, invoices and all other paperwork in the appropriate envelope. Take a note of any insurance premiums, your utility bills and business mileage, too. Tax planning and writing are alike in that it’s better to collect too much detail to begin with, rather than not enough. If The Powers That Be want to pick and choose what they’re interested in, then they can. Whether you’re dealing with receipts or words, producing extra to order and at short notice is always a nightmare. Less is most definitely not more when it comes to tax planning.
…tax thresholds and bands long before you need to know about them. That way you’ll avoid any nasty shocks. If you have no income other than from writing, contact your local library or check on line for reputable sources of free advice, such as the Citizen’s Advice Bureaux. Yes, it’s possible to do your own tax returns if they’re simple, but as soon as you possibly can, pay an accountant to do them for you. They spend their whole working lives keeping up to date with the latest legislation, and can pay for themselves by spotting things you might miss. If nothing else, they’ll have professional liability insurance to cover any mistakes they might make. Your cousin’s friend who “always does his own books and can do yours, too” isn’t likely to have that. He may be setting himself (and you) up for a self-assessed disaster.
DO IT NOW!
|This is the carrot. The tax office holds the stick.|
Tax planning takes twice as long tomorrow, four times as long next week and…well, you get the picture. Not only will you have the threat of that horrible job hanging over you, receipts and invoices never stop mounting up. Unless you take control, the situation can only get worse. And the funny thing is, once you grit your teeth and attack the task, it doesn’t take half as long as you think. I sat down this weekend to create a spreadsheet from my twelve envelopes of paperwork. It took me no more than two hours and I rewarded myself with cake as well as a cup of tea when I’d finished. I’ll deliver my spreadsheet, and all the supporting paperwork, to my accountant later today. My warm glow of smug satisfaction will last until the accountant’s bill arrives—which I’ll put straight into the right monthly envelope, of course. (Oh, really? Ed.)