Tax obligations for self-employed teachers

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Now you are joining A2i Academy you need to be in the know about your legal responsibilities, hence we put together the following to support you on this journey to wealth, an increase of income, control, freedom and flexibility.

We know that the idea of being self-employed is attractive, for the reasons listed above, but becoming your own boss also has its own responsibilities, and we at A2i Academy want to help you make that transition smoothly.

When you’re self-employed, it’s your responsibility to assess and manage your own taxes. You might feel like you’ve taken on a heavy load with this added task. That is why our accountant has 5 tips that will help put your mind at ease when starting a small business.

1. Self-employment registration

Given the responsibility of paying your own Income Tax and National Insurance contributions (NICs), you should let HMRC know as soon as possible. The first thing new self-employed people should do is file their taxes and report to HMRC– So, if you become self-employed between 6th April 2021 and 5th April 2022, you have until 5th October 2022.

Register online on the GOV.UK website to receive a 10-digit Unique Taxpayer Reference (UTR) number from HMRC within 10 working days, which you’ll need to access your Self Assessment account and submit your tax return.

2. Keep track of your tax bill

You need to determine what tax you’ll be responsible for paying. HMRC has two different types of taxes: Income Tax and National Insurance calculations.

Based on your taxable income (your earnings minus any allowable expenses), it calculates the appropriate level of tax bill due to them from the Self-Assessment tax return.

The amount of National Insurance you pay also depends on how much profit your business generates. (National insurance = income – expenses). Instead of the Class 1 NICs that employed people make, you’ll pay Class 2 (unless you earn less than £6,515 a year) and 4 (if you earn profits over £9,569 a year). 

Class 2 and 4 NIC rates for the 2021/22 tax year are:

Class 2 -£3.05 a week

Class 4 -9% on profits between £9,569 and £50,270 / 2% on profits over £50,270

3. Evaluate your liability insurance

We advise that all tutors take on liability insurance.

You should consider getting professional indemnity insurance if you anticipate that a client may sue because they are unhappy with your work.

Seek specialist advice to identify the best insurance for online tutoring.

4. Allowable expenses and tax relief

Once you’ve registered with HMRC, now you need to be aware of any allowances to reduce your profit which in effect will also reduce your tax bill.

Some of the allowances and reliefs you can receive include mileages/travel expenses, training courses or CPD that you paid for, which helps improve your knowledge or skills, professional memberships and even purchasing a new computer. All this on one condition that is for conducting your business only. To ensure you are fully compliant keep your receipts in digital or paper form.

5. Making tax easy, record, record, record

Making tax payments at the end of a fiscal year can be unnecessary stress, demanding more time from an already busy schedule.

Our advice is to keep a daily, weekly and monthly record keeping tidy bookkeeping of all your transitions .you can do this in your diary and it will save you the hassle at the end of the year. Moreover, you will be able to forecast your cashflow and evaluate how close you are to your financial freedom, this can be an indicator of how close you are to going self-employed full time.

If you have a busy schedule and can’t complete this on your own. We have resources to support you in that transition, just let us know.

I hope this helps, also enjoy the journey!

A2i Academy Team

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