Writing Wednesdays: How to manage money when you're self-employed as an author

Fun fact, in case you didn't already know: authors are self-employed. 

This obviously comes with all the fun and games of managing your own money, taxes included. (Well, except for JK Rowling. I imagine she does not worry about this the way most other authors do.)

I'm not going to talk about how authors don't actually earn that much money on average in this post, but what I am going to talk about is a few tips to get you started, that I've learnt about managing money I earn when I'm self-employed.

1. Set (up to) 50% aside for tax

Your tax bill is never going to be as high as 50% of your income. You get around the first £12,500 of your earnings tax-free, and then anything over that £12,500 up to £50,000 is charged at 20%. Earnings £50k - £150k are charged at 40% tax, and anything over £150k is charged at 45% tax. 

(Sounds complicated, I know.)

Right from the start, I've set aside 50% of my income immediately for tax bills. Even when my income from writing has been... er, let's just say, low. 

Basically - the way it's all broken down means that you will never pay over an entire 50% of your income to the tax man. But setting that aside as soon as you're paid means that you will never be surprised and scrabbling for the money when your tax bill does come through, and will always have plenty set aside ready for any nasty surprises in your tax bill. And whatever you have left over, you get to save. (Or spend!)

2. Get a separate account for your income and expenses

Keep your personal and 'business' money separate. I don't mean that you have to sort out an actual business bank account - just a separate personal one at a different bank to where you keep your own money will do. It can help keep that 50% you've set back for tax out of your mind so you're not tempted to spend it, and it'll help you keep track of expenses - which I'll talk more about in a second...

3. Get an accountant

Oh my God, I cannot recommend this enough. The first year I earned money as an author, my dad and I sat for hours working through the HMRC self-assessment form online trying to work it all out. It was a headache and a half.

Now, I save all my bank statements into an Excel, highlight anything that's income from my books and anything that's an 'expense' of any kind (usually with a description of what the expense was - eg. cup of tea when travelling for a meeting, train ticket for book event, internet bill). I send it over to my accountant and he does the rest. 

Yes, it's still work. It's still time and effort for me - but nowhere near as painful as it would be otherwise. 

4. Keep your receipts and track your expenses

This is where it helps to have a separate bank account for anything relating to your self-employed income. If I'm topping up my Oyster card and buying train tickets for meetings in London, I use my 'book' account to pay, instead of the one I buy groceries or yet more handbags in the Accessorize sale with. 

Hang on to your receipts. My accountant rarely needs them, but hanging onto them helps me keep track of things. 

And speaking of - tracking your expenses as you go will make it a lot easier for you to figure out down the line. (Something I'm always working on and trying to do a better job of, and am gradually getting better at!)

5. Track your money!

Take it a step further: don't just keep a list of your expenses, but all your income, too. I posted earlier this year about how I started budgeting and keeping track of everything I spent, and it's been working really well - which I'll talk about in another post later this week.

Something else I've done is made an Excel with any book deals and money I'm expecting. (And look - you don't have to be an Excel wizard to just make a list and add it all up, so don't let all these mentions of spreadsheets put you off.) 

Book deals can be complicated - money on signature, money on delivery, money on publication... When you start adding in translation deals, it can be a little confusing to keep track of what you've been paid for and what you haven't. Keeping a note just means there's one less thing you have to worry about.

6. Don't spend it all at once!

Look, I'm the first to admit that I'm a little spend-happy. Hence I started tracking everything I was spending. But that's with my salary from my day job - not the money I earn from my books. The only 'big' things I've spent that money on are car insurance, student loans - and two frivolous purchases of a Christmas charm bracelet from Pandora in 2017, and seeing the Lion King in the theatre at London after we closed the UK deal for TKB2 and The Beach House. (Definitely worth celebrating!)

It can be tempting when you get your first payment from a publisher to want to spend it - and I'm not saying don't treat yourself, but be sensible with it. And don't forget to keep some aside for tax!



What's your best practice for managing your money when you're self employed? Is there anything that still mystifies you about earning money as an author? Let me know in the comments or over on Twitter, @Reekles!