I've just - nearly - sold my first article on the strength of the pitch alone. The editor's e-mail offered a trial price for the article and the possibility of a higher price for future articles should this one work out, and I accepted, pending revisions I needed to make for length (it was 2000 words long; they only ever publish 1000-word pieces). The fact I haven't submitted it yet has allowed time for a thorny - but necessary - issue to crop up.

My partner casually said, 'Of course when you submit it, you'll need to check whether they want you to send an invoice. You'll need that for your records, too, for VAT. You add 15% to the bill, on top of what you agreed.' And that's where I got seriously confused.

Some explanation: I'm chronically ill and I've never been able to do a paying job before. When I began trying to sell my writing I registered myself as self-employed with the Tax Office and was told that I'd receive a certificate of exemption from National Insurance contributions, but have received no such thing and every time I try to call the Tax Office I end up in a long call centre queue - I can't afford endless phone-calls that don't lead to me speaking to someone. I've heard from other writers that I'm unlikely to hit a taxable threshold of income during this financial year and should just keep records of everything I earn, in the event that I ever do earn enough to pay tax, or the Tax Office decides to audit me, but that's all I know, and it's still hearsay rather than written confirmation from the Tax Office itself.

So: here's me very ignorant about tax and VAT, and suddenly being told that I need to go back and tell this editor, who I've agreed can pay me £65 for this article, that I actually want £65 plus 15%. My partner finds it simple to understand - in his working life, anyone providing a service (and writing something for a magazine is a service) charges 15% on top of the price, invoices the client for it, and everything's fine. He also asked the opinion of a friend of a friend who's a successful freelancer, and was told that this is standard practice for writers too.

BUT: I already agreed in writing (via e-mail) the £65 and I'm convinced the editor will think I'm being unprofessional by suddenly invoicing for a different figure and will decide not to buy the piece after all. I'm worried that my asking for VAT having not mentioned it before will be recognised as a newbie mistake and lead to the article being rejected - my writing CV mentions my writing having been published, but what it doesn't state is that none of those publication credits have been paying gigs. It's likely she assumes otherwise, and assumes I know what I'm doing, and I'm worried about contradicting that impression.

Or, if she does agree to the cost+VAT, and I don't earn my way to the tax threshold during this financial year (I realise this isn't necessarily the first in a flood of commissions, but still...), what happens to that extra 15%? I'd obviously put it in a bank account so that it's ready if the tax situation does change, but I feel like I'll be committing fraud if I ask the editor for the 15% for tax when I've already been given the impression that I won't be paying tax this financial year. My partner says that editors budget to cover VAT costs, but I'm really worried about doing something wrong/getting into trouble.

I'm terribly sorry for the length of this post, but I'm also terribly worried, and wanted to ensure I'd explained it clearly.

Firstly Welcome to WriteWords

Secondly, congratualtions on selling a piece.

And thirdly, to try to answer your question: I could be wrong, but as I understand it you only need to add VAT if you are a business and registered for VAT with your local tax office. I'm assuming you are neither, so don't add VAT onto the invoice.


- NaomiM

<Added>

tbh, I don't think you even need to invoice them, unless they've asked you to.

WN, welcome to WW, and congrats on selling your article!

You only have to charge VAT on things if your turnover from self-employment (i.e. your being-a-writer) is over a certain threshold. I think it's about £65,000 a year. So it sounds as if you don't need to worry. It's completely separate from income tax, which you pay on the profits of your business: i.e. the money you make after you've deduct all the expenses of the business (paper, postage, ink, research costs etc. etc.).

The Society of Authors has good basic leaflets on tax and VAT for writers: they're free if you're a member (you can join if you have a publishing contract, but I'm not sure what the arrangement if is the contracts are for articles), or a few pounds if you're not. http://www.societyofauthors.org/index.html

(Back to the VAT, just in case you sell tons in the near future. If you do find you're selling things, there's quite a wide band of turnover under the compulsory limit when you can register if you want to. It is actually advantageous, if most of the people you deal with are VAT registered. They don't mind you adding 15%, because they claim it back. And you don't have to account for each little 15%, you just pay a percentage of your turnover, quarterly (everything to do with VAT is quarterly, including letting them know if you're approaching the threshold), to the VAT-man. That percentage for writers is I think 11% (it depends on the industry), so you make 4% extra on everything, if you don't mind doing the VAT paperwork.)

But it sounds as if you don't have to worry about that at all, so don't panic.

Emma

<Added>

Meant to say that accounting packages for the computer will mostly cope with VAT. I've just bought QuickBooks, and it's dead easy to use. Might even brace myself and register.

And b) I'm wrong about VAT accounting being quarterly - if you're a small business, which writers almost always are, you can do it annually.

You would only charge them VAT if you were registered for VAT. You clearly are not, nor are you likely to be in the foreseeable future. You have to get past a high threshold of turnover to get into the VAT area. It is actually illegal to charge VAT if you are not registered and in any case the buying party couldn't recover the VAT you charged because there would not be a VAT number on your invoice.

Just charge the £65. You will of course have to pay income tax on that eventually so keep proper records of your earnings, but forget about VAT for the time being. It's irrelevant.

Chris

You will of course have to pay income tax on that eventually

You say you haven't had a proper job before, so the £65 will come under your personal tax threashold so you won't have to pay tax or national insurance on it.
However, keep all the paperwork, and declare it if you are getting tax credits.

You will of course have to pay income tax on that eventually

Yes, Naomi's right. I should have said:

You may of course have to pay income tax on that eventually

Chris