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Please note that I am not allowed to give specific tax advice, however, here's my understanding (based on the royalty payments I receive from my publisher.) - The amount of royalty is determined by my contract. This will be paid IN FULL, with no deductions at source. - If I chose to receive the payments in my own name (I don't, BTW), and they were the major part of my income, then I'd have to register as self-employed, pay various classes of NI, and pay tax on that income on a monthly or quarterly basis (depending on how big the payments were.) - If I chose to receive the payments in my own name (I still don't), and they were a minor part of my income, then I'd just submit the figures on the "any other income" section of my tax return each year, and pay the tax required. (It is NOT the responsibility of the government to send you a tax return - if you have income that isn't taxed at source you MUST contact the HMRC and ask them to send you such a thing.) - I personally choose to receive the royalties through my limited company. I, therefore, send my publisher an invoice each month, and they pay me. - My company is registered for VAT, and hence they pay me the royalties PLUS VAT... I then have to pay the VAT portion to the HMRC (quarterly), but they claim back the VAT they've paid me :-) In my case, the decision to receive the payments through a company was driven by the fact that I already had a company, and was prepared to assign the copyright of my books to it. The costs of running a company are not low - assume a few hundred quid to set it up, and £400-£700 a year for accountancy fees. The company will have to pay corporation tax (small companies rate - about 20%) on its PROFIT. That is to say, if the company buys business assets out of the income, then this will reduce the profit. I am guessing that a new laptop every year would, say, be a reasonable business asset for the kind of company that produces such things (no idea whether you're a writer, recording artist, graphic artist, photographer, inventor or other...) If the company pays you money as dividends, and you are a basic-rate tax payer (including your dividend income), then the corporation tax is deemed to cover the personal interest payments... so there's nothing more to pay. If you're a higher-rate tax payer (try not to be!), then you have to pay the difference between higher-rate and basic-rate on your dividend income. The question of moving overseas is a big one, and not to be taken lightly... If you remit money back to the UK, then you can be taxed on it as if it were UK income in any case. When there are huge amounts of money involved, it can be worth living in a lower-tax regime for a while., though this is an area where you need specialist advice, (generally, at least a few years.)... However, there aren't many of them in Europe - we have some of the lowest taxation in the EU - most "tax exiles" move to somewhere in Asia, or the US. Oh, don't even think of pretending to move abroad while actually staying in the UK - the HMRC _will_ find you out, assess the tax you SHOULD have paid, add interest, fine you, and if they really think you're taking the mickey, prosecute you.

Source(s)

The author has an audio book (UK Property Millionaire) published by Nightingale Conant, and a book (Property Negotiation), both available from Amazon and other good bookstores. Neither makes enough money to even think of trying to set up a tax fiddle for :-)

by mark_harrison_uk2

3 months ago

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