- HMRC and tax in the UK
- Employment status and tax
- Tax on freelance work UK
- How to declare casual income
As a busy, motivated and inspired GoStudent tutor you will be working as a freelancer and earning an hourly rate, but what does that mean for your taxes in the UK? The answer will depend on your overall employment situation – are you also employed by another organisation on a full or part-time basis for example?
But, is there such a thing as tax-free teaching jobs? Or self-employed teacher tax?
How do you declare casual income? And, how much can you earn before registering as self-employed? We will answer all these questions and more below so that you can confidently set yourself up then get on with the good stuff – sharing your knowledge with your students! 🧠
HMRC and tax in the UK
HMRC stands for Her Majesty's Revenue and Customs. Revenue means income and Customs means tax. It is a government department and has the responsibility of raising income for the UK through taxation.
Income tax in the UK is levied at progressive rates – higher rates of income tax apply to higher bands of income – or the more you earn the more you pay. Tax is charged on total income from all earned and investment sources after deductions and allowances are subtracted. 💸
You'll get a Personal Allowance of tax-free UK income each year if any of the following apply: you hold a British passport, you're a citizen of a European Economic Area country or you've worked for the UK government at any time during that tax year.
In the UK, you pay National Insurance contributions to qualify for certain benefits – like bereavement support and maternity and jobseekers allowance – and the State Pension. You pay mandatory NI if you’re 16 or over and are either an employee earning above £184 a week. There is also mandatory NI for sole traders and self-employed people making a profit of £6,515 or more a year.
Employment status and tax
If you are in contracted employment then your employer will be responsible for declaring the income you make with them to HMRC through the PAYE system. PAYE stands for 'Pay As You Earn'. Every time your salary is paid, your employer deducts Income Tax and pays the amount deducted to Revenue. 👛
Otherwise, you could be self-employed or maybe even a combination of the two – employed in one job and at the same time registered as self-employed in a different job – and therefore responsible for paying your own tax. If your monthly earnings exceed the marginal earnings threshold, you must report this to the HMRC tax office yourself.
The HMRC website has a tool that works out your employment status for you based on your answers to a series of questions. Use HMRC’s ‘check your employment status’ service on the GOV.UK website.
Students and tax
What if you are a student? Do students pay income tax? And if so, how much can students earn before paying tax? 🧑🎓
Students are liable for income tax and National Insurance in the same way as other workers. Student Loans do not count as taxable income in the UK. Unlike taxable income, non-taxable income doesn't count towards your Personal Allowance, so don't worry about any of these tipping you over the threshold.
Tax on freelance work UK
I work for myself, how do I pay taxes? And does the UK tax tutors differently?
Perhaps you run your own tutoring business or work for various freelance tutoring websites and tutor full time on a self-employed basis. Either way, as a tutor with GoStudent, you work as a freelancer and earn an hourly rate. You are therefore not bound by any contract and are responsible for reporting your own income to the HMRC tax office independently. 💰
The tax-free personal allowance and the tax bands are the same for freelance or self-employed and employed people. For the 2021-22 tax year, the government increased the Personal Allowance amount by £70 to £12,570. You'll then pay the basic rate of income tax – around 20 percent – on income up to £50,000.
How to declare casual income
So, declaring casual earnings to HMRC or declaring self-employed income is nothing to be afraid of. Firstly, as soon as you become self-employed, it’s important to tell HMRC.
Once you’re registered, each year, you’ll probably have to submit a Self Assessment tax return for the previous tax year. You will, among other things, need to declare your total income and expenses. When you’ve completed and submitted the return, you’ll be told how much tax and National Insurance you owe. You need to pay this by 31 January the following year. 📅
Remember to consider tutoring business tax deductions. As a freelance tutor, you can offset your total earnings with expenses you incur including things like office and school supplies, your home office setup including internet and software costs, relevant travel expenses and continuing training or seminars you undertake or attend.
The HMRC has some useful guides, videos and webinars to help you register and complete a Self Assessment tax return. Find out more on the GOV.UK website. 👍
We look forward to welcoming you on board as a GoStudent tutor. Some of the many benefits include working remotely and managing your own schedule. What’s more, we connect you with the students so you don’t need to advertise. Sound good? Register to become an online tutor today!