You would be deemed self-employed for tax purposes whether you work part-time as a private tutor or for tuition agencies. Because HMRC has started calling tuition agencies and requesting information on instructors to avoid tax evasion, you must take care of any tax-related matters or risk getting punished.
So, what do you have to do now?
- Within three months of starting your job as a private tutor, you must register as a self-employed person with HMRC online. You’ll receive a self-assessment tax return every year after the 6th of April once you’ve completed your registration.
- Instructions on how to declare your wages will be included in the self-assessment.
- National Insurance (NI) contributions are required. You must pay your Class 2 National Insurance contributions as a self-employed person, which will go toward your state pension and other benefits.
- If you earn more than a specific amount, you must also pay Class 4 contributions. You may be able to defer or be exempt from paying NI in certain circumstances. For more information and guidance, go to HMRC.
- Earnings beyond the tax-free personal allowance of £10,600 are taxed at a rate of 20%, with the remaining 40% taxed at higher rates.
- If you make more than a specific amount, you may be required to pay value-added tax. VAT is charged on earnings over £79,000 in the 2013/2014 tax year.
- If the students come to you instead of the other way around, you can claim returns on specific expenses such as equipment, postage, telephone use, travel, appropriate books and publications, and rent of your business premises.
- Parking fees, daycare, non-work-related training courses, childcare, and client entertainment are not allowable expenses.