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Are Writing Competition Prizes Taxable?

Prize money and winnings from writing competitions CAN be a taxable source of income.

Do you have to pay tax on writing competition winnings?

It depends on your personal circumstances. Some writers will have to pay tax. Others will not. You can learn more on HMRC's Authors and literary profits: awards and bursaries page.

Originally, this post stated: Yes, writing competition prizes are taxable. I had been told this during correspondence with Her Majesty's Revenue and Customs.

I was contacted early in 2017 by one of my website users who had been given contrary information by HM Revenue & Customs. So I wrote to them again asking for clarification. You can see the full correspondence below.

The first part of the post (under the title 'How do I know?') was written prior to updating the page. Below that you will see my recent letters to and from HMRC.

How do I know?

Well, I assumed (wrongly) that any money received as a prize is not subject to tax. Lottery winnings are tax free, so why would a writing competition be any different? Still, I was unsure and I’m the kind of person who likes to know stuff rather than guess at it. So, after winning my first writing competition, I wrote a letter of enquiry to HM Revenue & Customs. They sent me the following reply:

HM Revenue & Customs Logo

“The prize money received is treated as a professional receipt as you entered the competitions of your own accord so should be included on your self employed schedule for this source of income. As the prize is taxable then the competition entry fees will be an allowable expense against such income.”

GBP Great British Pound Sign

Sorry to be the bearer of bad tidings, but this means that writers should declare any earnings generated by their writing when filling out their annual tax return in the UK, including prize money from writing competitions they enter.

I know everyone is supposed to instinctively dislike the taxman, but I have found HMRC, especially the staff at my local tax office, very approachable and helpful with any enquiries I've made regarding my self employment over the years. To find out more, visit the HMRC website.

This information pertains to the UK tax office. I do not know if the same rules and laws apply in other countries around the world.

Tax Update January 2017

I have written to HM Revenue & Customs requesting clarification on this matter after receiving a message from one of my website users. She has received contrary information about declaring prize money from HMRC.

The letter I've written can be seen below. Below that you will see the response from HMRC, received in February 2017.

Letter To HMRC Regarding Prize Money

Dear Sir/Madam

I am writing to enquire if winnings from writing competitions are taxable.

I run a popular writing blog and my website users often query if they should pay tax on winnings from writing competitions that they have entered.

A few years ago, I wrote to you asking this question and received this response:

“The prize money received is treated as a professional receipt as you entered the competitions of your own accord so should be included on your self employed schedule for this source of income. As the prize is taxable then the competition entry fees will be an allowable expense against such income.”

Since then, I have always declared prize winnings as income.

I published a blog post about my experiences on my website as I thought it would help my users. You can see it here:

http://www.christopherfielden.com/short-story-tips-and-writing-advice/are-writing-competition-prizes-taxable.php

At the end of 2016, one of my website users wrote to me saying she had received contradictory advice from HMRC. When she asked about it, she was told winnings were not taxable. Her message to me read:

“…I have a letter from HMRC which states 'competition winnings are not taxable' - which contradicts the statement you received!”

Another website user emailed me today (12th Jan 2017) suggesting that if a competition is free to enter, any prize money won might not be taxable, but if you pay to enter a competition it could be.

I am writing to you for clarification. Please can you let me know if winnings from writing competitions are taxable? And does it make any difference if an entry fee has been paid when entering a competition? Thank you in advance for your help in this matter.

Kind regards,

Chris Fielden

Reply from HMRC

Dear Mr Fielden

Thank you for your letter of 12 January 2017.

I can confirm that whether a competition is free to enter or not doesn't have any relevance on whether any winnings/prize money is taxable. However, whether a writer entered the competition or a third party entered them without their consent is relevant.

Please note that there are written instructions covering literary prizes and these can be found at https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim50710.

As you will note from these instructions there is no easy answer to determining whether a prize is taxable or not and often it will be an individual's own professional situation which is important, i.e. are they a professional, including part-time, writer.

However, it is important to remember that each instance would be determined on its own individual circumstances.

Yours sincerely,

Customer Adviser

Conclusion

My circumstances mean I'm classed as a professional writer, so I have to declare any competition winnings as a source of taxable income. If you write as a hobby and not a profession, you may not have to pay tax.

To be sure, please check the HMRC website and see if your circumstances mean you have to pay tax.

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Comments:

Your comments:

Frank H
Very interesting. Perhaps a visit to the Schmidt Report site will reveal other answers? The site has certainly saved me loads over the years.

Chris Fielden
Thanks Frank, that's a really useful website :-)

Marion G
Please could you tell me if this applies to me? I live in France and pay my taxes here. Many thanks.

Chris Fielden
Marion, I'm unsure of the laws in France, so you would have to check. I wrote to the tax office in the UK when writing this post, and they were very helpful. Maybe you could try the same in France? If you do, please let me know what you find out :-)

Christian C
Thank you for this. This has saved me a phone call being stuck on hold with HMRC.

This has got me wondering. Do the entry fees being tax deductible only apply to successful competition wins or are all competition fees deductible?

Chris Fielden
Christian, all competition fees are tax deductible, regardless of whether you win or not :-)

Beth T
So, you are saying that if I am a Canadian, I can still submit my novel into these competitions, right?

Chris Fielden
Beth, mostly, yes! You will have to check the rules of each competition you enter, but the majority accept entries from anywhere in the world :)

Cepheus Q
Hi, I'm from the Philippines. I would like to know if you have a list of writing competitions that accepts international writers sans joining fee.

Thank you and I look forward to hearing from you soon.

Cheerio.

Chris Fielden
Hi Ces. Most of the competitions on these lists accept entries from writers living anywhere in the world. Quite a few are free to enter. I suggest you start your research there.

Good luck with your writing :-)

Linda G
This is such a helpful resource, thanks. Just would like to check my understanding of your previous comment "all competition fees are tax deductible, regardless of whether you win or not :-)". So, if I win less than I paid out over the tax year in entry fees (quite likely!) I won't owe tax on my winnings?

Chris Fielden
Hi Linda. I'm no tax advisor, but in answer to your question, yes, you are correct (to the best of my knowledge). If the money you have spent in entry fees exceeds what you've won in prize money, you might even be able to claim some tax back. The best bet is to get in touch with the tax office and clarify with them - I've found them to be really helpful. I'm set up with self-assessment, so sort it all out through that every year. You can find out more about self-assessment here.

Linda G
Thanks so much! I will double-check as you suggest.

Pam H
Re comp. winnings - looks like it's back to square one, as I have a letter from HMRC which states 'competition winnings are not taxable ' - which contradicts the statement you received!

Chris Fielden
Hi Pam. Thanks for letting me know. Well, that contradicts what I've been told. Apparently, if you've paid an entry fee then the winnings are taxable. That was what I was told.

I'll write to the tax office and see if I can get any more information.

Liz S
"If you've paid an entry fee, your winnings are taxable"

I wonder then, if there is no entry fee, it means the winnings are non-taxable?

Chris Fielden
Hi Liz. Good question... I've written to HMRC today to ask for clarification. Pam (see the comment above yours on my site) received contrary advice, so I have asked them about that too. Let's see what they say.