I had just finished my Bachelor’s degree and I left a Master’s degree programme for this job that I no longer had, and I was planning to marry my civil partner in less than a month. I felt like I had nothing to offer the world, and it was awful.
So I did what most depressed graduates do: spent two weeks not bathing, living in my pyjamas, eating ice cream for every meal and watching Coronation Street because there was a bit of comfort watching the lives of people worse than mine (Come back to The Street Becky! I need you!)
But then, something happened between the Ben & Jerrys & Becky. I had an idea. Working for a company maybe wasn’t for me. Being a team player, maybe, just maybe, was not for me. Because I’m a MAVERICK! I don’t take directions—I choose my own direction! After all, that was the spirit that led me from Rural Pennsylvania to the Big Smoke. Life as a marketing agent’s punch bag did not appeal to me. My destiny was… to own my own business!
Now, while this drama makes a great story, the truth is lots of things led to this point. I loved psychology, but couldn’t find a job in psychology; I actually started my bachelor’s wanting to own my own business. But I changed my course to psychology when I realised I had talent and liked it; and, getting sacked kicked me in the butt to think proactively about my future. At that moment I decided: “if no one is going to give me a job in psychology, then I’ll make my own!” And on my birthday in 2011, I decided I was a psychology tutor—because I said so!
Now, it is wonderful that tuition is something that anyone with confidence in their subject can do, however, it’s not as easy as Dr. Lucy Van Pelt’s business plan…
If you decide to become a private tutor, you need to declare yourself as self-employed. So what does this mean?
A self-employed person is someone who works for themselves at business. Also known as a sole-trader, a self-employed person provides goods or services to the public typically on a cash basis. This sounds great, doesn’t it? Well don’t confuse cash basis with being paid under the table. You still have to pay income tax and National Insurance on your earnings. So you must tell Her Majesty’s Revenue and Customs (HMRC) that you are self-employed as a sole-trader so that they can tax your business profits and charge your for your National Insurance contributions.
So Am I A Self-Employed Tutor?
To register as self-employed, first you must know your employment status. Sounds daft, but lots of people have lots of different work arrangements. Typically, a person has a regular job and they do some self-employed work on the side , while another person may be exclusively self-employed. Odds are good you probably know if you have a job or not and if you are paying taxes on that job, however, as we do live in a gig economy and if you have many jobs it might be tricky to know. For this reason, HRMC offers a handy-but-jargon-full Employment Status Indicator to identify what your employment status is.
The Employment Status Indicator can be a bit tricky to answer though, so an easier way is to check your employment against this simplified set of criteria.
Tutor Tax Expense Spreadsheet
How to Register as a Self-Employed Tutor
Once you know you are working as a self-employed person, you need to register with HMRC as a self-employed sole trader.
So the current rules (and the rules do change—frequently) is that you must declare yourself self-employed by October of your second tax year of business. if you start tutoring 31 March 2016, you must inform HMRC of your self-employed status by October 2017 because your first tax year is 31 March 2017 – 5 April 2017 and the second tax year begins on 6 April 2017. So you have until the end of 5 October 2017 to let HMRC know.
First, register online as self-employed using the online form. To do this you need to have your National Insurance Number (NIN) handy. If, for some reason you don’t have an NIN (for example, this is your first job) then you will need to register for one first. However, if you have worked any jobs you paid tax on before, you should already have one of these.
New rules stipulate that Overseas Students on Student Visas cannot be self-employed. This means, sadly, if you are on a student visa, you cannot work as a self-employed tutor in this country. Read more about that here. You may have to look for an company that will pay tax on your behalf instead.
Now if you have been self-employed before (Say, you had a previous life as a window washer before you became a high-flying academic), you will already have been assigned a Unique Taxpayer Reference (UTR) number and you will have to supply it. However, if this is your first time to the self-employment rodeo, don’t worry—HMRC will give you one once you complete this form in the mail.
Alternatively, if you are a Neo-Luddite like me, you can also register as self-employed by post, and request the form from HMRC:
So What Happens Next?
After you register—sit back, relax, finish your ice cream and watch Becky take off in the plane with her boyfriend to Australia (or try to find clients, whatever). In ten working days, HMRC will post you your UTR Number. You will have to go back online with an activation code enclosed in that letter to confirm your self-employment status.
Do I Register for VAT?
VAT, Value Added Tax, is a sales tax in the UK on most goods and services, however, tutors are lucky. Tax does not apply to education. So you do not have to charge your customers VAT for tuition or facilitate payment of VAT to HMRC. The downside of course, is that when you buy goods, services and capital for running your business, you must pay VAT all the time. In effect, it means if you open a business account at a wholesaler like Costco. Then you will have to pay VAT on what you buy there because the end user (you) always pays the VAT.
Now, You Better Work!
As RuPaul says, “You Better Work”. You’ve just registered as a self-employed tutor and you are now ready to find some clients and get to work!
As for finding that work and being sure you pay the correct amount of tax. Be sure to read the rest of the blogs in our tax series to find out more!