Tax Returns for English as Second Language Teachers

Anderson AccountsAccountancy Blog2 Comments

 

One of my oldest friends, Emma, has started teaching English as a second language to online students. She has a Facebook page that you can check out if you or anyone you know might be interested in her service.

She mentioned to me that questions around tax and accounting come up occasionally on her teaching groups and so I’ve written this article to help those offering this service.

First of all these are principles for teachers based in the UK. If you’re not then things might be different.

Overview 

In the UK you need to complete a tax return to declare any income you get that isn’t taxed at source. If you work for a company the likelihood is that you will be paid through the pay as you earn (PAYE) scheme and all of your tax will be done for you by your employer.

If you are self-employed in any way, for example if you are teaching and receiving income directly from students, or from a company who don’t tax your income first, then you will need to complete a tax return.

Registration

This is done by what is called a self-assessment tax return. You need to register with HMRC as self-employed.

The UK tax year runs from the 6 April one year to the 5 April the next year. So the year we are currently in started on the 6 April 2018 and will finish on 5 April 2019.

Ideally they will want you to register the October after the tax year ended. So if you’ve started teaching since April 2018, they will want you to register by October 2019.

You need to get your return submitted by the following January, so again if you started teaching since April 2018, you have got until January 2020 to complete your return.

Once you are registered as self-employed, HMRC will send you codes and login information. This will include a Unique Taxpayer Reference (UTR) and information on how to log into your account.

You could then authorise an accountant who is registered with HMRC to complete the return on your behalf if you wanted them to.

Record Keeping

The most important thing is to keep a good record of everything. Any income you receive you should log somewhere (I often provide my clients with a google spreadsheet they can use) and the same for any costs.

Many of your students may pay you in their home currency. You will only need to record the amount you receive in pounds, although you may want to also keep a log of how much you received in their currency.

Most costs that are related to your work can be claimed as a tax deductible expense in some way. Any costs that are 100% related to your teaching – e.g. text books – can be fully charged against your income. Other costs such as internet and your phone which you probably also use for personal use you can claim a portion of, which would need to be based on realistic assumptions.

I advise my clients to log everything that they think they may be able to claim and allow me to review it and discuss with them if necessary.

Tax Due

To work out your tax due, you take your total income and deduct your total allowable costs from them which will allow you to work out your profit.

If the profit is under the personal allowance (currently £11,500) then you will pay no tax. If it is above that, you pay tax at the basic rate of 20% until you get to the higher rate bracket (currently £46,350).

So that means that if you earn £11,501, you will pay tax on the £1 over the limit at 20% – so you would pay 20p in tax.

The other thing to be aware of is National Insurance contributions. These are due when your income is over £6,205 for the year, although you can chose to pay them voluntarily which you may want to do to ensure you have contributed enough to receive your state pension.

Depending on your income, HMRC may ask you to make payments on account. This would be payments throughout the year towards your next tax bill. They will base this on your current earnings, and obviously anything you pay will be deducted from the following year’s tax bill.

I hope that helps but please let me know if you have any further questions or if you want me to give you a quote for my services. Feel free to comment on this blog or email me directly.

 

Note: all figures are correct at time of writing. They may have changed if you are reading at a later date.

2 Comments on “Tax Returns for English as Second Language Teachers”

  1. This is great advice. I concur that if you are outside of the UK tax becomes a bit more tricky. However, if you are residing in the UK for 183 days (6 months) or so, doesn’t this still make you a UK resident? Thanks for the useful information.

    1. Hi Alex,

      Thanks for your comment.

      There are a number of tests to determine where you qualify as resident for tax purposes. Most of my clients are based in the UK anyway so it is not something that I consider myself an expert on.

      My intent was in ensuring that teachers in other countries were not going to take this as definitive advice because tax rules can vary considerably across the world.

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