For a UK resident professional author, royalties, advances and lump sums for selling rights are all income of the profession, taxed with the rest of the writing profits. Foreign royalties are taxed in the UK too, with credit for foreign tax only up to the UK tax on the net royalty profit and only for tax properly due under any treaty.

Are royalties trading income or miscellaneous income?

HMRC’s Business Income Manual at BIM50701 says the profits of UK resident individuals from literary, composing and similar activities, including profits from the literary, dramatic, film or musical copyright in their works, are charged to income tax either as profits of a profession or, where the activity does not amount to a profession, as miscellaneous income. The guidance applies equally to public lending right (BIM50755).

The distinction is important for one type of receipt. Where an author is taxed on professional profits, BIM50705 says all receipts from copyright are included, even lump sums for the outright assignment of copyright, serial rights, particular editions, or film, television or radio rights. The courts treat the author’s brain as the fixed capital and the copyright as circulating capital. Where the income is miscellaneous income, a lump sum for the assignment of copyright alone is excluded (Nethersole v Withers) and considered for Capital Gains Tax instead.

Royalties received by someone other than the author, such as a family member who inherited or was given the rights, are miscellaneous income under BIM50725, with a deduction for agents’ commission. Royalties received by a company fall under the corporate intangible assets regime.

How are advances on royalties taxed?

An advance is part of the author’s income from the work. BIM50705 states that a “lump sum” for the purpose of the assignment rule does not include a sum received on account of royalties, or an amount worked out by reference to a minimum or estimated number of copies or performances. So even a miscellaneous income author cannot treat an advance as a capital sale. BIM84060 also lists authors’ royalties and advances on royalties as examples of profits derived from creative works.

The year in which an advance is taxed depends on how the profits are computed. BIM35730 says the profits of an author are calculated in accordance with generally accepted accounting practice like any other profession, and there is no requirement to match research costs for a future book against the income that book eventually produces. Whether accounts are prepared on the cash basis or accruals basis will therefore affect timing, so the contract terms on when an advance is earned and whether it is returnable should be kept with the accounts.

What other receipts count as income?

  • Selling rights for a lump sum. In Glasson v Rougier, a sum paid to Georgette Heyer to commute future royalties was taxable. In Howson v Monsell, sales of film rights were normal incidents of the profession (BIM35725).
  • Manuscripts and papers. In Wain’s Executors v Cameron, the sale of working papers and drafts to a university was taxable professional income (BIM35735).
  • Prizes and bursaries. BIM50710 says an award received as an incident of the profession is normally a professional receipt, but an unsolicited prize given as a mark of honour or public esteem for outstanding achievement is not taxable.
  • Public lending right. BIM50755 says PLR is treated in the same way as copyright, and the maximum an author can receive in any one year is £6,600.
  • Receipts after stopping. Royalties arising after the author’s death or after the profession has permanently ceased are post cessation receipts (BIM50740).

What expenses can authors deduct?

BIM50720 allows the expenses of producing the works and of putting them on the market, including agents’ commission. BIM35725 confirms that research travel and writing materials are allowable because they do not create a capital asset. Under BIM35730 expenses fall in the period they are incurred, and in Mackenzie v Arnold expenses incurred years earlier while non resident could not be set against later receipts. Normal allowable expense rules apply to everything else.

Can authors smooth an uneven income?

Yes. Sections 221 to 225 of the 2005 Act let creators of literary or artistic works average profits over two consecutive tax years. BIM84060 says the trade qualifies if more than 50% of the profit is derived from creative works made personally by the taxpayer or a partner. BIM84001 explains that the relief only applies if profits are volatile, meaning one year’s profits are less than 75% of the other’s. A large advance followed by a lean year is the classic case. See averaging for farmers and creators for the mechanics.

How are foreign royalties taxed?

Royalties from foreign publishers, film companies or collecting societies are part of a UK resident author’s taxable income in the same way as UK royalties. Foreign countries often deduct tax at source, and the UK gives foreign tax credit relief subject to three rules.

  1. Source. Under extra statutory concession B8, described at INTM161130, payments from a foreign resident for the use of a copyright in that country may be treated as arising outside the UK for credit purposes, except to the extent they pay for services (other than merely incidental ones) performed in the UK. Where the owner of a copyright is not trading, the source may be regarded as the country where the right is enforceable.
  2. Minimum foreign tax. INTM161250 says credit is only given for foreign tax that is properly due and, where there is a treaty, payable in accordance with it. HMRC’s example is royalties from the Netherlands, where Article 12 of the treaty gives exemption, so no credit is due for any Netherlands tax suffered. If you do not claim a treaty reduction, credit is limited to the reduced amount.
  3. Limit. Where royalties are professional receipts, INTM168060 says credit is given against the UK tax on the profit the royalties produce after deducting attributable expenses, including a reasonable share of general expenses. Royalties from the same work are treated as a single item.

To claim treaty rates abroad an author usually needs a certificate of residence from HMRC. INTM162020 says the request must explain which treaty and income article the claim is made under, and individuals should apply through HMRC’s online tool. Some countries require their own claim form to be completed and sent with the request. Foreign royalties should also be reported correctly on the return, as covered in declaring foreign income.

What if a UK publisher pays a non resident author?

Section 906 of the Income Tax Act 2007 requires a payer to deduct income tax when a payment for the use of intellectual property is made to a non UK resident. EIM00736 notes that the definition in section 907 was widened by the Finance Act 2016 for payments on or after 28 June 2016, and that sections 911 and 914 relax the duty where the payer reasonably believes treaty relief is due. See withholding tax on royalties.

A worked example

Illustration only. Priya is a UK resident novelist. In the year she receives a £20,000 advance from her UK publisher, £4,000 of UK royalties and £5,000 of royalties from a foreign publisher after that country deducted £500 at a rate the treaty permits. Her expenses, including agents’ commission, are £5,800, of which £1,000 relates to the foreign royalties.

  • Professional receipts: £20,000 plus £4,000 plus the gross foreign royalties of £5,500 is £29,500.
  • Taxable profit: £29,500 less £5,800 is £23,700.
  • Foreign tax credit: the lower of £500 and the UK tax on the £4,500 net foreign royalty profit.

If next year’s profit is less than 75% of this year’s, she can consider an averaging claim.

What mistakes do authors make with royalties?

  • Treating an advance as a capital sum because it is a one off payment.
  • Recording foreign royalties net of foreign tax instead of grossing them up and claiming credit.
  • Claiming credit for foreign tax that a treaty would have removed.
  • Giving rights away without advice. Under Mason v Innes (BIM50745) a gift of rights is not a professional receipt, but it may be a Capital Gains Tax disposal, and a transfer to a company may bring in market value.

Content creators paid in products rather than royalties should read influencers and gifted products.

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Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 8 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.