Self Employed Private Tutor? Here is our Tax Advice guide just for you. Whether you are starting out or just want to understand more about allowable expenses for your Tax Return, here are some useful tips specifically for Self Employed Private Tutors.
Register with HMRC as a Self Employed Private Tutor
Whether you teach maths, english or science going self employed is the easiest way to kick start your career as a Self Employed Private Tutor so HMRC knows you need to pay Tax in a different way.
First of all you must let HMRC know that you are self employed and you can do that online here. Once this process is completed HMRC will send you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return.
As you are now self employed you are required to pay tax under Self Assessment which means you need to submit a Personal Tax Return by 31 January each year detailing your income from tutoring, the income tax and Class 2 & Class 4 National Insurance due, as well as making a payment for the tax and NI due. Your tax return submitted by 31 January covers the previous tax year. For example: your tax return due on 31 January 2018 details your trading income earned between 6 April 2016 to 5 April 2017.
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years tax bill, so make sure you budget for this additional payment too.
Your trading income, somewhat deceivingly, actually means your trading profits (all your income less all your allowable business expenses). Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties.
Allowable Start Up Expenses for Self Employed Private Tutor
Starting any business usually involves some element of cost so it is worth understanding whether these expenses will attract tax relief before you start spending. Here is a list of typically allowable start up expenses relevant if you are a self employed private tutor:
Stationery, Reference Books and Course Material
Whether you plan to go to your students houses or intend for them to come to your home, you will need to plan what/how you will teach them and have the right materials to do so. These are fully allowable and some may attract, so keep all the receipts of your equipment so you can discuss deductions with your accountant.
Computer & Printer
You will probably need a computer & printer to manage for teaching, preparing materials, research, manage your diary & social media or print out leaflets/brochures. Your computer and printer may be tax allowable either in full or a proportion of its value, so make a note and keep the receipt to discuss at tax time.
Having a website is so important and it gives you the chance to detail your services, prices and let people get a feel for your experience and personality. If you are considering investing in a website then it is worth noting that the website, domain and hosting again are all allowable expenses.
Allowable Ongoing Expenses for Self Employed Private Tutors
Once you have begun finding students you will being to incur expenses on an ongoing basis as you run your business. Here are some of the ongoing expenses you which you should look out for as a self employed private tutor and keep details of as they are generally tax allowable and reduce your tax bill:
Printing, books, pens and other Tutoring Equipment
Ongoing costs for your private tutoring are probably tax allowable to keep hold of all your receipts ready for tax time. Make a note of any pens, notepads or books you buy.
Phone and Internet
The cost of a business phone (mobile and/or landline) and your internet is an allowable expense however if there is personal use then only a portion of the contract costs can be claimed.
If you offer home tutoring visits you will incur costs when travelling to your students. Keep hold of your receipts for trains, tubes or taxis as they should all be allowable expenses and help reduce your tax bill.
If you need to use your car to travel to students and you should note down the mileage as this falls under the category of travel. Record you miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.
Use of Home
If you choose to teach students from your home then there are rules that will allow you to claim an amount for the running costs of doing so from your home as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.
You may opt to take courses to improve your teaching skills. These may be tax allowable so keep your receipts ready for when you need to submit your tax return. If you need to travel to your course or stay overnight as part of the training these costs are also tax deductible, as well as the cost of a basic meal for lunch/dinner. Take the time to collate your receipts or note down mileage so you can discuss your claim against your taxable income with your accountant.
Any marketing you do (online or offline), paid ads or anyone you pay to help you with your marketing is also fully allowable so make sure you download or ask your marketing assistant to send you an invoice before you pay them.
Accounting & Bookkeeping
Keeping accurate business records will help to avoid missing any entitlements or tax relief that you may be eligible for. Using a cloud based accounting software such as Xero, Quickbooks or Sage will make life easier, so if you do choose to sign up the cost of the monthly subscription is fully tax allowable. Then, if you choose to use an accountant to complete your self assessment tax return again their fees will be an allowable expense. Keeping accurate records will definitely help keep their fees down too as well as giving them all the information they need to make sure you receive all the deductions and reliefs to reduce your tax liability.
It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account is an allowable expense.