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As a freelance writer, the tax you pay will depend on your employment status. If you’re employed full-time but freelance as a side gig, you’ll be taxed in addition to your PAYE taxes. An example of this would be if you work in marketing full-time and you’re a novelist on the side.
In contrast, if you’re a full-time sole trader and you write freelance for multiple clients (although this is not always the case), you’ll have to complete a tax return to pay tax on your income.
You’ll be taxed at the 2020/21 Income Tax rates:
|Income||Tax Rate||Tax band|
|£12,501 – £50,000||20%||Basic Rate|
|£50,000 – £150,000||40%||Higher Rate|
|More than £150,000||45%||Additional Rate|
In this case, you won’t necessarily have to complete a tax return. It depends how much you earn from freelancing. If you earn up to £1000 per year, this is tax-free under the Trading Allowance.
For anything in excess of £1000, you will have to file a Self Assessment and complete a tax return. As a result, it’s really important that you keep track of your income (dates, amount earned etc.) using invoices and any relevant expenses that you can deduct.
It’s also important to bear in mind:
Take a look at our self-employed and employed tax calculator to calculate what you owe.
As a sole trader, you’ll be taxed on your overall profits. On anything that you earn over the Personal Allowance, you’ll be taxed at 20% until you reach £50,000. From here, you’ll be taxed at 40%.
You may want to set yourself up as a limited company, which means that your writing business is set up as a separate entity from you. To do this, you should be mindful of the fact that the tax implications are a little different:
Whether you’re a full-time freelance writer or whether it’s your side gig, there are expenses that you can claim that will reduce your tax bill.
Again, make sure that you keep track of your spending and hold on to all of your receipts so that you have evidence to offset your expenses against your income.
Here are a few examples of what you can deduct:
For a more detailed list, head over to HMRC.