Smith returned to England in 1785 and after further negotiations with her husband's creditors was able to settle her family in rented accommodation in Sussex, though they were to move frequently throughout Smith's life. She carried on writing poetry, but also turned her hand to translation. In 1787, Smith and her husband separated. It was from around this time that Smith began writing fiction. Between 1788 and 1791 Cadell published the first three of her novels, the ‘courtship’ narratives Emmeline, Ethelinde and Celestina. Although there are points of social satire and critique of the lot of unpropertied women in each of these narratives, it was Smith's fourth novel, Desmond, published in 1792, that was to launch her reputation as a political writer. Smith had made a brief visit to Paris part way through the composition of the novel and Desmond participates in the revolutionary debate as directly and polemically as any of her contemporary politicians who were exercised by events in France. That Smith turned to George Robinson for the publication of Desmond many have been a sign that her usual publisher Cadell were wary of its politics, but there may have been financial motives for the shift, as Smith's letters document some forthright exchanges between author and publisher on the subject of advances. As it was, Desmond did not make Smith much money, but it certainly drew attention to her as a novelist.

Desmond is Smith's only epistolary novel. There are references to and echoes of predecessors in the epistolary tradition: Sterne's A Sentimental Journey and Tristram Shandy; Burney's Evelina; Richardson's Clarissa and Sir Charles Grandison; Rousseau's Julie, ou La Nouvelle Héloïse; Goethe's The Sorrows of Young Werther and Sheridan's The Memoirs of Miss Sidney Bidulph. In Smith's novel the primary correspondence is between the guileless protagonist Lionel Desmond, and his erstwhile guardian and world-weary mentor Erasmus Bethel. Their letters chart what the wry Bethel sees as Desmond's ‘wild and romantic passion’ (D, 53) for Geraldine Verney, a married mother of three and model of wifely duty and selflessness, and the young idealist 's ‘romantic and … patriotic journey to France’(D, 53) at the start of the French Revolution.