Are Writing Competition Prizes Taxable?
NOTE: Most of the information on this page pertains to tax advice in the UK because that's where I live and pay tax. There is some additional information towards the bottom of the post from an author regarding his experiences in Australia.
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 contest winnings? Are Writing Competition Prizes Taxable?
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 more 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:
“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.”
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
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 titled "Are Writing Competition Prizes Taxable?" because I thought it would help my users. You can see it here:
https://dkrefkxrvx.onrocket.site/short-story-tips-and-writing-advice/are-writing-competition-prizes-taxable.php [NOTE, this link is to the page you are currently reading, so I have not made it clickable]
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
Paying Tax on Competition Winnings in Australia
In 2021, Australian author Jim Ditchfield kindly supplied the following information about the advice he received from the tax office in Australia:
G'Day Chris, I'm an Australian writer. My advice from the Aussie tax man is, as I understand it, very simple: If you claim expenses from writing such as computer, printer, ink, paper, entry fees etc, then you have to pay taxes on any winnings as they are deemed part of your income. Seems fair to me.
Like you I've found the Tax man (or woman) very friendly.
This information was added to the post in March 2021. I'd like to thank Jim for sharing his experiences with me (and you, the reader).
Conclusion
So, are writing competition prizes taxable? 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.
Frequently Asked Questions
Are Writing Competition Prizes Taxable?
If you work as writer and that is your job, the answer is yes. If writing is a hobby for you and does not generate income, the answer is no.
Please note, the above is a simple answer to a complex question and the answer depends on your personal circumstances. Be sure to check the tax laws in your country of residence.
More Writing Advice
I hope you found this "Are Writing Competition Prizes Taxable?" page helpful. You can find lots of other writing tips and advice in the Advice section of this website.
