Current tax and benefit rules do not work well for authors. Many authors hold a number of jobs to sustain a creative career, and need to navigate a complex, bureaucratic tax system. Those who are registered solely as self-employed do not receive holiday or sick pay, or other employee benefits such as company pensions.
A 2016 European Commission study on authors’ remuneration which surveyed authors, journalists, translators and illustrators across Europe found that UK writers had less protection than in many other countries. For example the AGESSA scheme in France allows authors to receive benefits such as sick pay and unemployment benefit, with publishers and other content users making contributions to the fund. Similar provisions apply in Germany.
The only thing that hurts more than paying an income tax is not having to pay an income tax.
Thomas Dewar – Income Tax, Pay, More
Universal Credit
Universal Credit (UC) replaces several other benefits such as Housing Benefit, Income Support, income-based Jobseeker’s Allowance (JSA) and income-related Employment and Support Allowance (ESA).
See https://www.gov.uk/universal-credit for details of eligibility and how to get assessed.
UC aims to support those who are self-employed but earning a low income. Under the assessment criteria authors and other creative workers are tested to see whether they are ‘Gainfully Self-Employed’ (GSE). Each claimant must report business income and expenses to the Department for Work and Pensions (DWP) every month via an online UC account.
Each claimant’s circumstances are different, and the process considers a range of factors. For example, if you have a spouse or partner that you live with you must make a joint claim for your household, even if your partner is not eligible. How much you can get will depend on your partner’s income and savings, as well as your own. Hours can be calculated as full time or part time depending on your self-employment.
Claimants may be eligible for a 12-month start-up period during which their UC is calculated on a monthly basis based on their reported net monthly earnings. After the 12 months, the Minimum Income Floor (MIF) rule introduces an assumption that they are earning a minimum amount, usually based on 35 hours at the National Minimum Wage (NMW).
If you earn more than the MIF: Your UC payment will be based on your actual earnings.
If you earn less than the MIF: Your UC payment is usually calculated using the minimum income floor, which is likely to be based on what a full-time worker on minimum wage would earn. By using the MIF, your UC payment will be lower than if DWP had used your actual earnings. There is usually an expectation to seek additional work to top up income.
This method of assessment can be unfair to many creative workers, as it can reduce their UC payments by treating them as if they have earnings they do not have. In some cases there can be months where workers do earn more than this income floor, for example when an advance is paid, or a project is funded, their actual earnings are reassessed and may result in benefits are stopped.
The Society of Authors has heard from many members who have experienced issues with UC and that this system unfairly penalises the short-term, project-based nature of work in the creative and cultural industries. This is especially true for authors whose incomes can be highly variable. The MIF means that workers have their UC payments reduced or stopped in months where they are seeking work and need the support the most.
Many authors may have no entitlement to UC. This is especially concerning when the median annual income of a professional author is £7,000, just over a third of the National Living Wage. For many authors, this means that it is extremely difficult to sustain a living income in the creative industries and many have portfolio careers to help make ends meet.
Campaign
The Society of Authors supports Equity’s campaign calling for the removal of the Minimum Income Floor to those claiming Universal Credit. Find out more about the campaign and sign the petition.
Protect self-employed creatives: Abolish the minimum income floor in Universal Credit | Megaphone UK
Sources of advice
Universal Credit (UC) rules are complex, and each situation is unique and will need to be assessed individually. If you need bespoke guidance on the subject or have questions about UC rules and your personal situation, we encourage you to get in touch with specialist benefits advisors. Here are some helpful resources:
- Artists’ Union Universal Credit Guide
- Visit Turn to Us for advice and support
- Citizens Advice – Universal Credit help
- Low Income Tax Reform Group – Universal credit | Low Incomes Tax Reform Group
We are hearing from authors who are struggling under the current system. If that includes you, please consider applying to our Authors’ Contingency Fund, or contacting one of our advisors.
Making Tax Digital (MTD)
The Treasury announced in December 2022 that compulsory use of HMRC’s Making Tax Digital (MTD) scheme for Income Tax Self-Assessment will be delayed for two years to 2026, having already pushed the date back to 2024 because the technology was not ready. They have also substantially raised the minimum threshold from £10,000, representing a move that will protect authors, which we have been campaigning for since 2017.
Digitisation is a vital update to the UK tax system, however we welcome this necessary delay. Implementation of the programme in its proposed form would have forced any freelancer with an annual income of over £10,000 to file quarterly updates to HMRC using new software which is yet to be piloted. This would have been an onerous administrative and financial burden to place on lower paid workers and would have led to numerous complications.
The new minimum threshold will be £50,000, effective from April 2026, reducing to £30,000 from April 2027.
We sincerely hope that the government will take this time to continue to review the proposed changes, so that they do not make unreasonable demands of lower paid workers’ time and money, including scrapping the proposed quarterly returns, as the current system of a single, annual payment is perfectly adequate.
National Insurance Contributions (NICs)
In September 2018 the Government announced that it was dropping plans to abolish Class 2 NICs. This is good news for the lowest paid, but we question why HMRC has completely rolled back plans that would have benefited 3.4 million people.
Class 2 NICs are paid by self-employed workers earning more than £6,365 (2019/2020 figures). Those earning below this threshold can make voluntary Class 2 contributions of £3 a week to access benefits such as the state pension. Had Class 2 NICs been absolished, those earning below the threshold could only have made voluntary contributions through Class 3 NICs, which are £15 a week. This adds up to £780 per year, a fivefold increase on the Class 2 annual contribution of £156.
The SoA submitted evidence and met with HMRC officials, in order to express concern that this change would disproportionately affect authors and other creators who are already struggling financially. We are pleased that HMRC has listened to concerns of the lowest-paid earners. However we urge the Government to continue to find an approach to National Insurance which simplifies the system for everyone, whilst protecting the pensions of the lowest paid.
#PayTheCreator
Creators’ work is the foundation of the largest sector within the UK economy. Yet their needs are repeatedly ignored when policy, economic and support decisions are being made.
We are a member of the Creator’s Rights Alliance (CRA) #PayTheCreator campaign, which brings together the campaigning work of member organisations to collectively call for creators of all types to be paid properly for the work they do, and the rights they grant, and to be given the same considerations enjoyed by other workers in the areas of pay, business support and policy making.
Related links
- I had a visit from my benefits assessor – and now I fear the state more than poverty – Rob Palk in The Guardian, 26 October 2019