The nature of what a journalist does lends itself, at times, to an employment status that can be confusing at tax time.
For starters, many journalists work for a business that submits their tax through the Pay-As-You-Earn (PAYE) system.
But some journalists work on a freelance basis, either as their only source of income, or as a source of additional taxable income.
Your tax status, and allowances for expenses, are very different for each situation.
This article will help clear up any confusion that may arise by clarifying your tax status and obligations.
Your Taxes through the PAYE System
If you have “earnings through employment”, otherwise known as Schedule E income, your employer is already deducting income tax from your salary. Unless you are taxed at a higher rate (for those earning more than £37,400), you will more than likely not be required to submit a tax return.
Your P60 will show the total income you received and the amount of tax that was deducted.
Your Taxes if Self-Employed
This type of income is referred to as Schedule D income. You are responsible for making a declaration to HM Revenue & Customs for any income you receive that falls into this category. This is done by completing a Self-Assessment Form and filing it with your local tax office.
Additionally, if your gross earnings (including expenses) reach £68,000 (from 1st May 2009) in any consecutive 12 months you must register for VAT.
The deadline for filing is 30th June from for the tax year that ends in April.
If this is your first year filing a Self-Assessment Form, you may not have to pay the tax on your profits until after the end of that year.
In your second year and beyond, you will typically pay your tax in two installments on 31st January and 31st of July.
Remember, if you receive income that is taxed through the PAYE system, you will not record this on your self-assessment form.
Expenses through the PAYE system
There are very strict requirements for expenses you can deduct if you are receiving from an employer through the PAYE system. The most simple way of stating it is, you may only deduct those expenses that are wholly, exclusively and necessarily incurred in the duties of your employment.
Expenses While Self-Employed
There are certain expenses which contain an element of private expenditure and should be documented to HMRC. Such expenses include the business use of a telephone, vehicle expenses, and a room that is used as an office.
The key to ensuring a return that passes muster with HMRC is simple, yet detailed record keeping. While sometimes, you may have to estimate certain expenses, you should be prepared to have valid evidence to support any estimates (e.g. business mileage, or telephone calls).
Some of the most common allowable expenses include:
• Use of home or office, or a charge for additional lighting and heating or office rental costs
• Agents’ fees and commissions
• Secretarial assistance
• Professional subscriptions
• Taxis, travelling and accommodation (including food in some cases)
• Car running expenses
• Courses and conferences
• Accountancy fees, legal costs, bookkeeping
• Copies of own books for publicity
This is only a partial list. To inquire about a specific expense and to ensure you file a proper claim, you can ask a question. We’ll let you know what HMRC will likely accept.