Whether you work part time as a tutor or work for tuition agencies, you would still be considered self-employed for tax purposes. Because HMRC has been contacting tuition agencies, asking for details on tutors to prevent tax evasion, it is vital that you have everything tax-related taken care of or risk being fined.
What do you need to do then?
- You must register online as self-employed with HMRC within 3 months of the start of your employment. Once you’ve completed your registration, you’ll receive a self-assessment tax return every year after the 6th of April. The self assessment will contain instructions on how to declare your earnings
- You need to pay National Insurance (NI) contributions. Being self-employed, you need to pay your own Class 2 National Insurance contributions, which will go to your state pension and other benefits. If you earn over a certain threshold, you will have to pay Class 4 contributions as well. There are instances when you can defer your NI payment or be exempt from it altogether. Refer to HMRC for guidance and information
- You have to pay 20% income tax for earnings over the tax free personal allowance of £10,600, while 40% will be taxed on higher rates.
- You may have to pay value added tax if you earn over a certain amount. In the 2013/2014 tax year, VAT is imposed on earnings over £79,000.
- You can claim returns on certain expenses, such as equipment, postage, telephone use, travel, relevant books and magazines, and rent of your own business premises, if the students come to you instead of the other way around.
- You cannot claim as an expense parking fines, childcare, training courses unrelated to your job, childcare, and client entertainment.
As self employed, you are solely responsible for keeping track of your income and expenses, so you need to keep accurate business records.