TAXING changes
In, out, in, out, shake it all about! Simon Whaley dances the self-employed hokey cokey to clarify the latest tax changes for writers
When it comes to the business of writing, there are some aspects we all detest: tax. And if not the payments themselves, then it’s the completion of the annual tax return.
In recent years, governments have made several announcements regarding the digitisation and simplification of tax returns, but then changed their minds, only to be followed by further announcements, leaving many writers confused as to what is going on.
So let’s do the self-employment hokey cokey to clarify what’s in, what’s out, and what’s still being shaken all about!
Class 2 NI
The success of our writing business has implications for how much and of which class of National Insurance we pay. We can be liable for two types: Class 2 and Class 4 contributions.
Class 2 contributions are only payable if we currently make a profit of more than £6,205 in the year from our writing, and are calculated at the rate of £2.95 a week.
Class 4 contributions are currently payable, at a rate of 9%, on any writing profits over £8,424, and these are calculated when we complete our annual tax return.
Class 2 contributions are important because these are the ones that entitle us to certain benefits, like the state pension.
However, writers making less than £6,205 profit are not liable for Class 2 NI, which means they may have gaps in their National Insurance contributions. This could impact upon future state pension and other benefit entitlements.