You are a writer. You work for yourself. Therefore you’re classed as a sole trader. This means you’re self-employed - even if you haven’t yet told HM Revenue and Customs (HMRC). You are a business, and as such, you have to file a tax return.
Last week I wrote an introduction on self-assessment and writing a tax return. Having started as a self-published author myself, I understand that it can be a little daunting, especially the first time. Remember that I don't work for HMRC, nor is this a tax website; detailed information will be found on their pages. This is an overview, based on my experience only.
A couple of years ago I was leading a workshop on self-publishing during an Eastercon, and I distinctly remember the face of surprise and joy on an author who didn't know they could claim back items.
Keeping track of all the money spent and gained in the course of a year is an essential part of running a business. You must also keep records of your personal income (from your day job perhaps, but it can come from inheritance, rent, etc.).
I mentioned last week that you must choose how to make up your records before you start: cash basis or traditional accounting. With cash basis, you only record income or expenses when you receive money or pay a bill. With traditional accounting, you record income/royalties and expenses by the date you invoiced or were billed.
If you have other sources of income (e.g. the day job that most author will have), you can consider traditional accounting, as you can offset losses against other taxable income (‘sideways loss relief’).
You must keep a record of all personal income and business sales and all business expenditures. You don't need to send them to the Inland Revenue, but they may ask for it, so the records must be stored safely for a certain number of years.
To note: there is a difference between capital allowance and business expenses. Capital allowance includes assets that you keep using in your business, such as a laptop or a computer, a printer, a desk and a chair for your studio. Business expenses are those incurred in the daily running of your business (including interest payments or finance costs for buying assets), which I have listed below.
There are several business expenses you can claim as a writer, and I will mention them in their categories:
office, property, equipment: e.g. laptop, ledgers, ink cartriges, paper, phone bills, internet bills, rent, insurance, electricity (obviously your mobile bill will not just be business expenses, and neither is your rent - you must calculate a percentage for the business), etc.
travel expenses: e.g. petrol, train/plane tickets, hotel rooms, food when you are away from home on business, etc.
reselling goods: e.g. copies of your books you have purchased to resell at conventions, raw materials, etc.
legal and financial costs: e.g. lawyer to go over contracts, fees to maintain a business account, etc.
marketing, entertainment and subscriptions: e.g. advertising, subscription to societies or association related to your business, website costs, free samples, etc.
And before you buy champagne for all your friends at your next book launch, remember that you cannot claim it! Event hospitality or entertaining customers do not count. And neither does your gym membership (you know, in case you figured that all that time sitting at your desk for work justified the gym fees...)
The IR call centre will be able to give you all the info you need if you can't find them on their website.
Feel free to ask questions under this thread :)
Don't get caught out and do your homework!
Here are some links to get you started: More details on what to claim. How long do you need to keep your records for?