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 £12,570 annual Personal Allowance. 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 AS A FREELANCER?

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.

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?

Our tax software for tutors 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 freemium account alone allows you to add a certain number of income and expenditure entries each month so that you can calculate the tax owed. Better yet, it automatically 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 freemium 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 freemium account today.

Blog content is for information purposes and over time may become outdated, although we do strive to keep it current. It's written to help you understand your Tax's and is not to be relied upon as professional accounting, tax and legal advice due to differences in everyone's circumstances. For additional help please contact our support team or HMRC.