Tax Implications When Tutoring As A Freelancer

A number of full-time teaching professionals are uncertain of the Income Tax aspect of being a sole trader. It’s understandable, as there are a range of tax implications when tutoring as a freelancer. They include:

  • Registering as a self-employed tutor
  • Balancing this role alongside full-time work
  • Completing your Self Assessment tax return
  • Claiming relevant expenses
  • Paying tax as a tutor

Despite appearing complicated, private tutoring can be a good opportunity to maximise your income and progress in your career. So, to help those considering self-employment, we’ve explored the above implications in full below – as well as explained how to file a tax return as a private tutor.

How do I register as a self-employed tutor?

Before we can teach you how to file a tax return as a private tutor, we need to explain some self-employment tax rules.

In the UK, all citizens are entitled to a £12,500 annual Personal Allowance (as of 2020/21). It’s tax-free and applies to both sole traders and employed individuals. If you are the former, you’re also entitled to a tax-free trading allowance of £1,000.

However, if you earn above this trading allowance, you will be expected to pay tax, and therefore will need to register as self-employed with HMRC (Her Majesty Revenue & Customs). This can all be done online.

Be sure to register as self-employed long before the Self Assessment tax return deadline, as it can take up to 10 working days to receive your 10-digit Unique Taxpayer Reference (UTR) number. You’ll need this to submit a tax return successfully.

Once you’ve acquired that, you’re ready to start tutoring, record your earnings, file your Self Assessment tax return, and pay your resulting Income Tax bill.

How do I complete a Self Assessment tax return form?

You’ll need to tell HMRC what you owe before paying tax as a tutor. This process is known as the Self Assessment tax return, and it’s here you’ll be expected to report your earnings for the previous tax year (6th April to 5th April).

By reporting your earnings, HMRC can tax you correctly and take your National Insurance payments (if not already done so through PAYE).

If this is your first time filing for Self Assessment, then you will need to register by the 5th October in order to be able to submit. You then have until 31st January to file your Self Assessment tax return online.

You will also need to pay any tax you owe for the previous tax year (balancing payment) and your first payment on account by 31st January. You may need to make a second payment on account by 31st July too. Please be aware that the government has introduced a 12-month extension for deferred July 2020 payments and those due in January 2021.

Should you fail to meet these deadlines, HMRC may penalise you. So try to file your Self Assessment tax return earlier if possible to allow yourself enough time.

To ensure you don’t have any added tax penalties, here’s everything you’ll need for your Self Assessment:

  • 10-digit UTR
  • National Insurance number
  • Details of any untaxed income from the tax year
  • Records of any expenses relating to self-employment
  • P60 or other records that detail how much income you’ve already paid tax on

How can I keep records of what I earn from tutoring jobs?

Tax software is an easy way to log your self-employed income. You can simply categorise a payment made to you, and it will automatically add this to your Self Assessment tax return.

Beyond that, you may also wish to keep a hold of receipts, invoices and bank statements that show payments that you’ve made for business purposes. Why? Because you may be able to use these expenses to lower your tax liability and increase your take-home pay.

Allowable expenses, such as some forms of travel and stationery, can be claimed back on. You may also be able to make other claims, such as:

Textbooks – The textbooks your students work from can be expensive, but are often a requirement if you hope to teach according to the curriculum. As such, they can be claimed back on using your Self Assessment tax return.

Home office – If you have lessons at your home or mark work in your home office, you are able to claim a proportion of your utility bills. This includes your electricity and heating, and involves determining the percentage of time you spend working at home.

Subscriptions – Similarly to textbooks, in order to teach according to awarding bodies, you’ll need to have membership to their sites. This membership fee can be claimed back on as it directly relates to your business venture.

Of course, keeping receipts can seem like an impossible task. Not only are they subject to wear and tear, but they’re also easy to lose if you don’t store them carefully. It’s for this reason that a number of tutors use software like GoSimpleTax.

How GoSimpleTax can help

Our software is award-winning, recognised by HMRC, and used by thousands of sole traders. Our free trial alone allows you to automatically calculate income, expenditure and tax owed. Better yet, it shows you how much you owe throughout the year as you input new information, helping you to manage your finances in real time.

For users interested in upgrading their free account to a regular subscription, you can take photos of your receipts and never worry about holding on to them again. Likewise, a full account lets you file your automatically completed Self Assessment tax return directly to HMRC.

Tutoring as a freelancer can be exhausting. So lighten the load a little with GoSimpleTax. Sign up for your free trial today.

How Far Back Does A Tax Investigation Go?

How Far Back Does a Tax Investigation Go?

Often, the taxman can seem like a shadowy figure, rarely seen or heard until he suspects something isn’t quite right.

If someone is thought to be evading payments – either accidentally or purposely – a tax investigation will be launched to reclaim owed money, and culprits will be subject to HMRC tax investigation penalties for failing to follow the rules.

But why would HMRC visit me? And how far back does a tax investigation go? Here, we answer some of the key questions surrounding a visit from the taxman.

How long does a tax investigation take?

Depending on the complications and the severity of your case, a tax investigation with HMRC can last several months after receiving that first letter. The size of the business also plays a big part, too. Large businesses that are turning over higher amounts usually take much longer to resolve compared to a one-person limited company, for example.

The average time to get to a resolution for one aspect of a taxation in a small case is usually between 3 – 6 months. However, for a full-blown tax investigation, resolution times can extend to as long as 18 months.

Why would HMRC visit me?

Anybody who earns in the UK is required to pay tax. If you’re an employee, your employer will take care of all your payments for you – removing what you owe HMRC from your wages and sending it straight to the taxman (a process known as PAYE).

However, if you earn money outside of regular employment – perhaps you work for yourself, operate your own company, rent out property or make a profit from selling assets – you will need to file a Self Assessment.

The online Self Assessment tax return deadline is 31st January, and your form must be an accurate reflection of your earnings across the previous tax year. For example, earnings between 6th April 2018 and 5th April 2019 must be declared by January 31st 2020. If HMRC believe there are errors or discrepancies, they may launch an investigation into your tax return.

What’s involved in a tax investigation and how far can HMRC go back for tax?

At the start of any tax investigation, HMRC will send a letter informing you that they are looking into your tax submissions. They may do this because they’ve spotted a clerical error, eyed up some inconsistent figures, or received a tip-off from an anonymous source that you may be underpaying.

You’ll be asked to produce several documents during the investigation, including bank statements, invoices, expense receipts and quotes from third parties, all of which can help HMRC determine whether you’ve committed an offence.

So can HMRC investigate closed companies? When it comes to historic cases, HMRC also have the power to reopen previously settled tax returns if an investigation unearths puzzling results. In normal cases, the HMRC tax investigation time limit is 4 years, in which they can go back to claim money from taxpayers.

If someone has been visibly careless (submitting tax returns with mistakes), HMRC can journey back 6 years. For (alleged) deliberate tax avoidance, they can delve into 20 years’ worth of tax returns to find what they’re looking for, so if you’re thinking of closing a limited company and starting a new one, it may be best to reconsider your options.

Use GoSimpleTax software for impeccable Self Assessment returns

Tax investigations are stressful and costly, often resulting in hefty financial penalties and even convictions in worst-case scenarios.

That’s why it’s so important to be 100% accurate on your Self Assessment tax return and keep the taxman happy. If you make accurate tax return submissions, on time every year, you’re unlikely to be subject to any type of scrutiny.

GoSimpleTax software is designed to help you create HMRC-friendly tax returns that are sent to the right place at the right time. Sample our free trial today and get your forms fired off before the Self Assessment tax return deadline on 31st January 2020.

Last updated on 5th November 2019.

Need help preparing your tax return?

By downloading GoSimpleTax for iOS or Android, you can save yourself hours of valuable time and prevent the stress of completing your annual tax return.

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How GoSimpleTax Works

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Simply register for free with your full name and email address.

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Select the income you receive and follow the hints and tips for potential tax savings.

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Validate your personal information when you’re happy with the figures and submit directly to HMRC to get confirmation of your submission in just a few seconds.

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Who Is GoSimpleTax for?

Sole Traders

With GoSimpleTax by your side, your tax duties as a sole trader are made easier than ever before.

Investors

Manage your HMRC tax return on assets and investments easily with GoSimpleTax.

Uber & Taxi Drivers

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Ministers of Religion

Claim all tax exemptions available to Ministers of Religion and avoid being penalised for the avoidable.

Online Sellers

Usure about the tax return for eBay, Etsy, Gumtree, and Amazon sellers? GoSimpleTax has the answers.

Freelancers

Self-employed workers can spend more time generating income and less worrying about their tax return.

Landlords

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Expats

Stumbling over the tax return for overseas income? Let GoSimpleTax guide the way.

What is the income tax personal allowance for 2020?

WHAT IS A PERSONAL TAX ALLOWANCE?

Much to the disappointment of HMRC, every tax year most UK taxpayers are entitled to a UK personal allowance on their taxable income. To put it simply, most people can receive a certain amount of money before having to pay any income tax. This is what is known as a personal tax allowance.

If you’re struggling to get your head around personal tax allowances, GoSimpleTax is here to explain everything you need to know, simply and easily.

HOW MUCH IS THE STANDARD PERSONAL TAX ALLOWANCE?

The standard personal tax allowance amount is £12,500 for 2019/2020. Any income you earn after that will be taxable. The amount of tax you pay after your personal allowance is dependent on how much you earn during a tax year. For example, If your income is above £100,000, basic personal allowance is reduced by £1 for each £2 you earn over the £100,000 limit, irrespective of age.

Personal Allowance & Tax Thresholds

Personal Tax Allowance2018/20192019/2020
Tax-free personal allowance£11,850£12,500
Basic Tax Rate (20%)£1-£34,500 (after allowance)£1-£37,500 (after allowance)
Higher Tax Rate (40%)Income over £34,500Income over £37,500
Additional Tax Rate (45%)Income over £150,000Income over £150,000

If your tax affairs are a little more complex, for example, if you’re married or in a civil partnership and receive a marriage allowance, or for age-related or income-related reasons, then your personal allowance works a little differently. You could also receive tax-free allowances for:

  • your first £1,000 of income from self-employment
  • your first £1,000 of income from property you rent

HOW DO I GET MY PERSONAL ALLOWANCE?

Getting your personal allowance is simple. If you file a self-assessment tax return, you will automatically receive your tax-free personal allowance.

Is there an easier way to file?

If you need to file a tax return, GoSimpleTax is here to make things unbelievably simple. Forget about long-winded form-filling and unwelcome phone calls with HMRC. Simply enter the details of your income and expenses and we’ll create your tax return for you and submit it online directly to HMRC. 

Access GoSimpleTax and discover a new free way of filing your return (HMRC approved), know what expenses will help you lower your tax bill and keep all your records online, safe & sound. Ready to file with one click. Start your free trial today!

Do I need an accountant to do my tax return?

When you realise you have to submit a tax return, you’ll have a lot of questions. ‘When is it due?’ and ‘What do I include?’ will probably be on your list. The one at the very top of it will likely be, ‘Do I need an accountant for a watertight tax return?’.

Some people undertake the DIY method, but doing your taxes for the first time can be scary. Here, we take a look at the benefits and drawbacks of outsourcing this task to an accountant. With the advent of mobile tax software, you may want to avoid them altogether…

WHAT IS A TAX RETURN ACCOUNTANT?

An accountant does many tasks for the taxpayer, and the tax return is one of the biggest – they will file it for you on an annual basis. Other duties include:

  • Keeping on top of your books
  • Claiming expenses
  • Calculating the tax owed
  • Finding savings to reduce your tax liability

HOW MUCH DOES A TAX RETURN ACCOUNTANT COST?

As with any service, a low cost is unlikely to get you great value for money. How much you should pay for a tax return accountant will depend on the amount of work they do for you, but you can easily pay up to £500 for the service described above.

You might find that some quotes are fixed and offer you more services than you require. Additionally, the cost may differ according to the type of tax return you need, and there are specific requirements related to your circumstances too – a general self-employed tax return will be different to that of a sole trader who also has a job or rental income, for example.

DO I NEED AN ACCOUNTANT?

No – GoSimpleTax allows you to easily stay on top of your taxes without the use of an accountant. Our no-jargon tax return software helps you understand and learn how to do your own Self Assessment tax return in minutes, just like an expert.

GoSimpleTax keeps things super simple and enables you to discover tax savings you didn’t even know existed. Just ask Liam, one of our users – he was able to reduce his tax liability by claiming for homeworking costs.

Whether you have a good grasp on your tax savings or you’re clueless when it comes to tax, GoSimpleTax will make sense of everything for you. It means you’ll potentially save hundreds of pounds in accounting fees, whilst still fulfilling your tax obligations and maximising your take-home pay. 

SUBMIT YOUR SELF-EMPLOYED TAX RETURN WITH GOSIMPLETAX

Tax return software is about three things: accuracy, convenience, and zero confusion.

Our Self Assessment software gives you full visibility over your finances. You can see everything in real time and from any device, including your tax liability. It also provides you with tax-saving suggestions by revealing deductible items that will automatically save you money.

‘Do I need an accountant to do my tax return?’ Not with Self Assessment software. GoSimpleTax allows anyone to be a tax expert. Find out for yourself by signing up for our free trial. You can use it to start calculating your tax bill straight away – no credit card required.

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