When working as a student it is important that you are aware of your legal responsibilities, in particular relating to taxes.
Her Majesty’s Revenue and Customs (HMRC) have created a help page specifically aimed at students, which you can find here: http://www.hmrc.gov.uk/students/
To point you in the right direction, Student Tutor UK do not employ you directly and pay you a wage as other tutoring agencies might, and due to the freelance nature of the job you will be regarded as self-employed while working as a student tutor through this website. This means that you need to register with HMRC as self-employed, regardless of whether you have other jobs or employment, and even if you expect to be earning less than the Personal Allowance.
At the end of the tax year (5th April) HMRC will send you a tax return that you need to complete in order to declare your earnings. This is to ensure that you pay the correct amount of tax (if any) on all your combined income.
You need to register as self-employed within 3 months of starting to avoid a penalty. It is unclear whether you need to do so even if you have not yet given any lessons. To be on the safe side you may prefer to do so straight away – it doesn’t make a difference to the amount of tax you pay in the end.
The amount of tax you need to pay depends on how much you earn rather than how many hours you work. Everyone also has a so-called Personal Allowance, which is an amount that you can earn without having to pay any tax at all. For the 2011-12 tax year the Personal Allowance is £7475, rising to £8105 in 2012-13. Even if you earn below this amount, you will still need to complete your annual tax return.
Completing your tax return
Many people who’ve never done it think this will be oh-so complicated, but in fact filling your self assessment tax return is pretty straight forward, especially when you do it online. You will need the following information:
- Income details from all your jobs, including PAYE employment and self employment
- You may need to provide details about interest from savings (we hope you have some!)
Create an account on the HMRC website to be able to access the self assessment tools. The online help provided for the return form itself is reasonably easy to understand, and it’s always possible to save at any point and continue later.
Another advantage of the online form is that you have an extended limit for filing (submitting) the return.
You should keep good book-keeping records of all financial transactions related to providing private tuition. This will not only help you complete your tax return faster, but is definitely also good practice for possibly starting your own business later in life.
We would also recommend that you employ professionalism and, for example, issue receipts to your tutees to confirm that you have received payment for a particular lesson. You probably don’t need to prepare invoices with a letter head, but showing professionalism can convince tutees that you know what you are doing and can lead to repeat business.
If you purchase anything specifically for your job as a private tutor, then you may be able to claim it as an expense. ‘Specifically’ means that you use it strictly for giving tuition, but not for your ‘normal’ activities. You can’t for example claim for a pen, unless you use that pen only during your sessions – you’re not allowed to use it in university lectures or you’ll only be able to to claim for a small proportion of the use. But you might be able to claim for, say, a dedicated folder where you keep records about your tutees.
Do bear in mind that you can’t really cheat the tax man. If you want to claim expenses, then as a self emplyed person you do still have to have earned the money you are spending, as the expenses don’t reduce your taxes directly, but rather the amount of income on which tax is due. (What that means is that if you have income before tax of £100, then buy something for £30 as an allowable expense, you’ll be paying tax on only the remaining £70 – that’s £14 as opposed to £20 – assuming of course this is earned above your Personal Allowance.)
*Disclaimer – seek professional advice
We are not accountants or financial advisers. The information on this page does not constitute professional advice and we would strongly recommend that you seek assistance from HMRC and/or a qualified and FSA regulated financial adviser if anything is unclear or if you have any tax related questions.