Working as a 'part-time' tutor in the evenings and at weekends while you're also employed by a company or local authority can make paying tax a little more complicated. Here's our advice for navigating this particular situation.
We recently received an email from a prospective tutor asking about paying tax when you're both self-employed and a PAYE employee. We've been asked this question a few times before, so we thought it would be useful to share our reply as a public post with permission from the sender.
Here's the sender's original message:
Please can you advise, I cannot find this information anywhere!
I am currently employed and earn £60000 by a Local Authority. I would like to start teaching piano lessons privately. Would I still need to pay tax? Is this the self-employed one because I
am also employed? or is there a different route?
I am only thinking of a few pupils as I am busy at work. Does this make a difference? Is there a minimum amount before you have to pay or do they count my other salary as well? Do they include my other salary and therefore I have to pay class 4 tax?
Here's our reply:
Thanks for your email.
I'll try my best to answer this, although I should say that I'm not an accountant :)
As far as I'm aware, as soon as you start making money from tutoring, even if it's only £30 a week, you need to register as self-employed with HMRC. In terms of tax, they look at your combined income from employment and self-employment. If it's over the tax-free Personal Allowance of £10,000 (which it will be if you earn £60k as PAYE), you'd be expected to pay additional tax.
In the past, HMRC has given me the option of paying this additional tax as a one-off payment via BACs, or they can collect it automatically through your PAYE set-up. Personally, I had them collect it automatically.
With National Insurance, if your self-employed profits exceed £6,365, you’ll have to pay a flat rate of £3.00 per week, which is Class 2 National Insurance.
Generally, you'd already be paying Class 1 National Insurance through PAYE via your employer, but Class 2 is paid directly to HMRC through a direct debit. I don't think they give you the option of paying it through your PAYE automatically.
If you're doing well with your self-employed income, you'll also have to pay Class 4 National Insurance. This is charged at 9% for all self-employed profits between £8,632 and £50,000, and at 2% for all profits greater than £50,000.
Hope this helps. There's a great article that pretty much explains all of this on Crunch. And it gives examples too - https://www.crunch.co.uk/knowledge/tax/freelancing-side-tax-implications/
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