Tax, specifically self assessment (UK)

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areteus

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Ok, I am aware that pretty much everyone in the US self assesses tax returns but here in the UK the default is that your employer does all the messing around with forms and stuff so we tend to not bother with it unless we are self employed... as a result of working in this environment for all my life I now find myself completely incapable of knowing what to do about my own taxes...

Situation is: Am in the process of getting two short stories published by different US publishers. Not expecting anything like a massive income but there will be an income and if things continue this income may get greater as more stories are published...

Now, I am getting the whole ITIN situation under control (been sent a lot of info by one of the publishers and will be acting on it as soon as I get an official letter from them saying they intend to publish) so I should not be getting any hassle from the US side of things. However, I am not sure what to do about the UK side of things.

Obviously, I will need to be on self assessment in order to officially declare my income from these royalties... but I will also be working on more traditional 9-5 jobs throughout the year and these will have their own tax returns which will, presumably, be dealt with by my employers still...

So, does anyone know how this is usually handled? Do I have to self assess for both sources of income? Are there any members here who have been in the same situation and have some advice on how to handle it? In fact any information anyone here has on any aspect of this would be useful...

Thank you in advance...
 

waylander

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I have never bothered mentioning the money I've received from the sale of short fiction.
 

areteus

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Yeah, but I suspect the whole ITIN process opens up all sorts of flags for them :)
 

Polenth

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My understanding was PAYE would continue the same, with self-assessment for the self-employed part (including registering as self-employed, which is a separate form). But I didn't need to do this, as I didn't have a job when I started selling stuff, so I've just done the self-assessment bit. If I were you, I'd phone to tax office to clarify the PAYE part.

(In case you hadn't seen it, this is the official website, which has all the details and forms: http://www.hmrc.gov.uk/ )
 

areteus

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Thanks, I was planning to call them but thought I'd check on any personal experiences first in case I ask a question that could be answered easier here without the traditional 15 hour wait on hold :)
 

Darklite

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I phoned the tax office a couple of days ago to ask the very same question. I was told I don't have to fill in any forms if the income is less than £7000 (approx can't remember exact figure) a year because that's how much you're allowed to earn before you pay tax. All I was told to do was write a letter to the tax office declaring how much I have earned.

You shouldn't have long to wait when you call though. I was answered almost straight away.
 

whacko

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You could set your writing up as a company, separate from your main income. That way you'd only have to declare and deal with the money earned from writing and your employer would deal with your other tax deductions.

A limited company can be set up online for £12 these days. But you would probably be best as a trading company. And corporation tax is lower than income tax too.

But, to be honest, I think Waylander's idea is the best way to go. Don't tell anybody!

Regards

Whacko
 

Theo81

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If you are submitting your tax returns as an individual (as opposed to a ltd company or something), you don't need an ITIN number - just leave the space on W8-BEN (or whatever the damn form is) blank.
 

areteus

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I'll ring them and check, the letter for less than £7000 sounds about right (though my personal tax code is lower than this based on my current job which is high paying but only casual).

Declaring as a company - not sure about that...
 

areteus

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If you are submitting your tax returns as an individual (as opposed to a ltd company or something), you don't need an ITIN number - just leave the space on W8-BEN (or whatever the damn form is) blank.

Not according to the publisher. They are insisting on it to keep their records straight in case of audit. If you don't have an ITIN, the US government automatically take 30% of all your income on the understanding you are actually a US citizen evading tax somewhere... if however you have an ITIN, they accept you as a foreign national who is paying tax elsewhere and there exempt from US taxes.

There have been a number of publishers recently who have been stung by this and fines have been issued, which is why some of them are a little nervy about it. Apparently the government has been applying the rules more stringently than it used to these past few years (my theory is to reclaim some income lost due to the credit crunch - it is easier to look at old tax regs which have not been enforced and enforce them than it is to vote new taxes in).
 

Becky Black

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I was told I had to register as self-employed, which I've done. I also have the 9-5 job and pay those taxes though PAYE. The period of self-employment had to start from when I started earning money - so the publication date of my book in my case. It's not only income tax, there's NI too, though if you earn below a certain amount you get an exemption from that.

And I definitely had to get an ITIN to keep my American publisher from witholding. I don't think there's any way around that one.

Frankly, I'm not much help because despite plenty of phone calls and stuff I'm still totally confused about the tax! I've had the notice to complete the self-assessment by April next year. Good thing I've got so long, I might have got it figured out by then.

If only I was earning enough royalties to pay an accountant!
 

Xelebes

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If UK tax is anything like Canadian tax, be warned that personal use of any income retained within the trading company (if you so choose to incorporate and place all income there) by a shareholder (that is, you) will be taxed as dividends. The cost of time and organisation might not be worth it.
 

Theo81

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Not according to the publisher. They are insisting on it to keep their records straight in case of audit. If you don't have an ITIN, the US government automatically take 30% of all your income on the understanding you are actually a US citizen evading tax somewhere... if however you have an ITIN, they accept you as a foreign national who is paying tax elsewhere and there exempt from US taxes.

There have been a number of publishers recently who have been stung by this and fines have been issued, which is why some of them are a little nervy about it. Apparently the government has been applying the rules more stringently than it used to these past few years (my theory is to reclaim some income lost due to the credit crunch - it is easier to look at old tax regs which have not been enforced and enforce them than it is to vote new taxes in).

As far as I know from what I have been told and from practical experience, your publishers are wrong. I don't have an ITIN number. I filled out my W8-BEN (which is the form which states you are not a US citizen and allows you to take advantage of the tax rate according the your countries holding treaty. Or something) without one and I don't have 30% taken from me. The ITIN is the number which identifies you to the tax office - not the bit which exempts you from tax.

If your publishers insist, Scarlett Peaches did a blog post (and posted it on the board) with step by step instructions for how a Brit gets an ITIN number. It's probably best to have one; I am convinced not having one is going to come back and bite me one day.
 

areteus

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Oh, I have plenty of advice from the publisher about that (and lots of info from other sources). The ITIN is not the issue at all, the issue is the local tax. Luckily it seems less complex than I anticipated if all I need to do is send in a letter declaring my income as less than the limit...
 

Darklite

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As far as I know from what I have been told and from practical experience, your publishers are wrong. I don't have an ITIN number. I filled out my W8-BEN (which is the form which states you are not a US citizen and allows you to take advantage of the tax rate according the your countries holding treaty. Or something) without one and I don't have 30% taken from me. The ITIN is the number which identifies you to the tax office - not the bit which exempts you from tax.

If your publishers insist, Scarlett Peaches did a blog post (and posted it on the board) with step by step instructions for how a Brit gets an ITIN number. It's probably best to have one; I am convinced not having one is going to come back and bite me one day.


I didn't get my ITIN in time for my first book release and I got 30% tax stopped from my royalties and the forms are way too complicated for me to apply to get reimbursed. You do need the ITIN. So in my case the ITIN was exactly what I need to exempt me from tax. I get annoyed when people say there is no need for one because in my experience there definitely is.
 

skylark

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Oh, I have plenty of advice from the publisher about that (and lots of info from other sources). The ITIN is not the issue at all, the issue is the local tax. Luckily it seems less complex than I anticipated if all I need to do is send in a letter declaring my income as less than the limit...

I'm slightly confused here, but be aware that that limit is for all your earnings. If you earn more than the limit in your 9-5 job(s), you don't get to have it again for your writing income.
 

areteus

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Oh yeah, aware of that. At present not an issue... I earned far far less than the limit in my 9-5 job last year (seriously, I had a bad year work wise but that was mainly because I was studying rather than earning) and most of what I did earn was between Jan and April.

I suppose the plan is:

- Get ITIN sorted asap (well, a trip to London would be pleasant anyway, even if I have to spend some of that time being strip searched by the US embassey security :) )
- Talk to HMRC about self assessment options
- See what happens with Royalties in the first due payment and decide based on that and working status what to do about tax...
 

Becky Black

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- Get ITIN sorted asap (well, a trip to London would be pleasant anyway, even if I have to spend some of that time being strip searched by the US embassey security :) )
- Talk to HMRC about self assessment options
- See what happens with Royalties in the first due payment and decide based on that and working status what to do about tax...

I was really looking forward to being frisked by US Marines when I went to the embassy, but sadly they were just British security contractors, and they didn't frisk me. :D
 

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I think you you might know, every thing you need to Know but here is a summary regarding self assessment in the UK.
Ring tax man and register yourself as being self employed.It is worth doing this ,even if you currently have no income,also make a note of the date,it's one of the questions on the form. Tell the tax man ,if your total income is below £35.000 ,you only need the short form.
Keep two note books. In one, record your income,the other record your expenses. Keep all paper work relating to both.
Fill in the form ,when it is sent ,even if you are not liable for tax.If you should become totally self employed you will also need to change your National Insurance status.
 

areteus

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I assume you mean expenses specific to writing? Rather than, for example, expenses needed for living like food and rent (cos that is paid for out of a different fund :) ).

Thanks for this. I shall sort this out before October when I am expecting my first royalty payment.
 

Theo81

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I didn't get my ITIN in time for my first book release and I got 30% tax stopped from my royalties and the forms are way too complicated for me to apply to get reimbursed. You do need the ITIN. So in my case the ITIN was exactly what I need to exempt me from tax. I get annoyed when people say there is no need for one because in my experience there definitely is.

From the instructions of form W-8BEN (the form you fill out to declare you are a foreigner and will be taking advantage of your countries tax rate. This is the form which stops the 30% being taken from you.) The ITIN identifies you to the IRS, the W-8BEN stops the tax being taken.

You may want to obtain and provide a U.S. TIN on Form W-8BEN even though it is not required.

You don't need one, but the instructions suggest you do. This bit is quoted from the "tip" concerning line 6.
 

Darklite

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I still couldn’t get the tax exemption without the ITIN. Without that the W-8BEN is useless. At least it is with my publisher.
 

VeryVerity

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I know this thread is old-ish, but wanted to cover a few points:

Currently no income tax payable for total income under 7475 per annum.

If total self employed profit is under ~£5000 you don't have to pay any additional NI, but have to ask for a small earnings exception on the right form.

If you earn any money that is not taxed at source, you should register for self assessment.

If you make a loss on your self employment (think about it: use of home as office, cover art, website subscriptions, travel and research expenses, a % to reflect business proportion of phone bills, internet bills, computer equipment) then you can offset this against earned income that has has tax deducted (PAYE) and possibly generate a tax refund. For this reason alone it's arguably worth registering for self assessment.

Doing it through a company is not recommended - £15 to form, but the amount of compliance you have to do is very high, as are the penalties for late filing, and criminal penalties for non filing. Typically, don't expect to be able to produce statutory accounts or a corporation tax return without an accountant, at a cost of > £300 a year (and that's very cheap).

The loss offset makes a self employment more attractive than a limited company anyway.

ETA: this advice, especially losses, is based on a start up business. If you've struck rich, a Ltd may indeed be far more tax efficient. General disclaimer always seek professional advice tailored to your personal circumstances etc :D

If your income is 'low' and you are over 25, or under 25 and have children, you may be entitled to tax credits to top up income.

Verity, revealing her brand of day job geekery.
 
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areteus

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Wow, lots of good info there. Thanks.
As for tax credits, nope... don't qualify at all. We checked, even on the income of my wife alone (never mind adding in what I might earn writing plus my day job when I manage to have one) we don't qualify for tax credits. I do need to get on and organise this soon... first payment (assuming there are any sales :) ) is due in january!
 

shaldna

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