It has been estimated that the number of private tutors in the UK has risen to over a million in recent years – making tutoring jobs one of the most popular professions in Britain, especially as jobs for ex teachers, 10,000 of whom are estimated to have left their profession between 2010 and 2015 according to an 2017 article in the independent.
The demand for private tutors today is the highest it has ever been, with tutors available for all sorts of subjects and skills with varying qualifications and experience. Due to this rise in popularity, the home tutoring profession and private tutoring incomes are being monitored more closely than ever by the UK internal revenue office, HM Revenue & Customs (HMRC).
In becoming a private tutor, you are classed as a self-employed sole trader. Working as a sole trader entails certain responsibilities, such as adhering to tax laws and reporting what you earn to HMRC without delay. This is called a tax return, and can be done online.
It is crucial that you record your what you earn as a tutor as soon as possible once you have started working. Failure to do so will entail a penalty fine from the tax office, so it's safest to sort your personal income reports out immediately.
Reporting your income is a straightforward process, it doesn't have to be complicated or confusing. This guide will give tax tips, answer the questions that tutors frequently ask when starting their business, and show you everything you need to do to record your income and file a tax return.
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How do I Register as a Self-Employed Tutor?
You will need to register as self-employed with HMRC to make sure you pay the correct Income Tax and National Insurance for your wages.
As a sole trader you will have to complete a self-assessment tax return every year after 5th April, which you can do online. You must do this even if you are also employed elsewhere, as this can change how much you are taxed altogether across all of your employment.
What you will pay in Income Tax depends on how much of your income is above your Personal Allowance, and how much of this falls within each tax band.
The current 2017/18 tax-free Personal Allowance in the UK is £11,500. This is the amount of income that you can earn a year that you don’t have to pay tax on.
Anything you earn over this amount will be taxed, and the tax you pay will depend on how much you earn above your personal allowance.
HMRC has been clamping down in recent years to make sure that private tutors pay the correct taxes on their income to tackle tax evasion.
It is crucial that you register as self-employed and submit details of your income to the government within three months of starting your work. Failure to do this puts you at risk of being audited and paying a fine.
Some tutoring companies operate Pay as You Earn (PAYE), working as a middleman between the tutor and the student. If you work for an agency with PAYE, your work will likely be taxed at source, so there will be no paperwork for you to deal with. This will usually mean as well that you pay a small payroll fee.
Some tutoring agencies, including Superprof, operate on the basis that all payment is to be managed solely between the tutor and the student.
This means that all payment and income records are your own responsibility, and you must therefore keep a detailed record of your earnings for HMRC.
How Do I Complete a Self-Assessment Form?
For a simple and easy self-assessment process, it’s important to have ready all the necessary information you need for your personal circumstances. In becoming a private tutor, you should be keeping records of your income and have all the relevant paperwork up to date to make this process as straightforward as possible.
For your self-assessment form you will need:
- Records of your income and expenses
- If you are also employed, your PAYE earnings
- Any ‘other income’ records, such as pensions, savings or investments
- A cheque book and paying-in book
- Your P60
- Your bank statements or online banking access
You will need to fill in a self-assessment form called SA100, which is available on the HMRC website. There are guidance notes available to help you during the process of filling out the form.
There are supplementary pages of the self-assessment form to fill out if you have more than one self-employed job. These will give you the opportunity to declare any earnings from other jobs that you have as a sole trader.
This can be filled out by hand and posted, or filled out and submitted online. HMRC can send you the relevant forms for your circumstances and the guidance notes to help you fill them out. They can also be downloaded from their website.
If you are completing the form online, you must register and make a login on the HMRC website. You will then receive a password which will grant you access to the online forms. You will receive the password in the post, which can sometimes take a couple of weeks, so it’s a good idea to leave yourself plenty of time.
The deadline for a tax return by post is 31st October. If you complete the forms online, then you have until 31st January. A penalty of £100 can be given if you miss these deadlines.
If you have any problems, you can call the HMRC Self-Assessment helpline on 0845 9000 444.
When you're all set up and ready to start tutoring read up on how to motivate your students and improve their learning.
How Can I Keep Records of What I Earn from Tutoring Jobs?
As a sole trader, you are legally obliged to keep accurate and detailed records of what you earn. This is necessary so that HMRC can calculate your taxes correctly. This will also help you keep your business organised and will make your tax return easier.
To keep on top of your records, you can organise your income into logs of income and allowable business expenditure, along with their relative dates.
It is important to keep records of everything that you earn. This can be done in a Word document, Excel spreadsheet or a notebook, for example. You can also keep a log of your expenses, which can include: travel, advertising, books, stationery, insurance and the business use of your home.
Keeping clear, detailed and dated logs of what you earn is the best way to keep on top of your business and will help you fill out your self-assessment forms quicker and more easily.
Make sure everything you record is honest and accurate, and take the time to double-check all the information you input into your books, documents or spreadsheets to make sure there are no typos or mistakes.
Expenses are important to keep track of when completing your tax return, as you can deduct those costs from your taxable profits, which will reduce your tax bill.
What Tax Do I Pay if I Become a Tutor?
Being self-employed means you will pay National Insurance and Income Tax on your earnings that go above your personal allowance.
You will pay your own Class 2 National Insurance contribution. If you earn over a certain amount of money, you may also need to pay Class 4 National Insurance contributions.
Most home tutors work alongside another job. If private tutoring is a supplement to other employment that you have, this will have an effect on what you are taxed overall, as you are earning money from more than one job. Whatever you earn over your personal allowance is taxed, across all of your employment.
Many tutors also work alongside their university studies. This will usually mean that you are not earning as much as full-time tutors or tutors with other full-time employment, and you may not exceed your personal allowance. If this is the case, you will not pay any taxes on what you earn, but you must still declare what you earn to HMRC.
Depending on your earnings, you might be exempt from paying National Insurance altogether.
As a sole trader you might also have to pay Value Added Tax (VAT). If you earn over a certain amount of money, you could be eligible to pay VAT on the services you provide. In the 2017/2018 tax year, the threshold for VAT registration in the UK is on earnings of over £85,000.
Now you have a complete understanding of how to report the income earned from tutoring, learn more about obtaining DBS checks, the legalities of giving home tuition and the types of insurance you could invest in.
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You can also check out the article: New DBS checks replaces CRBS - A summary of the changes.