This guidance relates to teachers working as a Sole Trader, although the principles are very similar for partnerships (see our page on structure if you are not sure about these terms).
For Limited Companies the rules are different – see our Guide to Working through a Limited Company, and our parent company Whitefield Tax has a lot of relevant information on Limited Company Taxation.
Basis of Taxation
Income Tax and Self Employed NI is calculated on Business Profits – business income less business expenses. See our Separate Guidance around Expenses and our Guidance on Terminology
The profits are entered on your Self Assessment Return, along with any other taxable income.
Income Tax
The tax rates (2024/25) are:
- £0 to £12,570 – 0%
- £12,570 to £50,270 – 20% – Basic Rate Band
- £50,270 to £125,140 – 40% – Higher Rate Band
- over £125,140 – 45% – Additional Rate Band
The £12,570 0% Personal Allowance tapers out on Incomes over £100,000 at £1 tapered deduction for each £2 of income over £100,000 creating a 60% marginal rate.
National Insurance
Whereas Income Tax is aggregated, National Insurance is by source – so NI is payable separately on an employment and on profits from yoga teaching. See our Guide to National Insurance
NI on business profits is (2024/25):
- Class 4 – 6% on profits between £12,570 and £50,270 and 2% on profits over that level.
- Class 2 – is no longer payable from 2024/25 unless your business profits are less than £6,725 and you elect to pay it to get credit for State Pension.
Business Losses
If you make a loss – that’s to say your business expenses as a teacher exceed your business income, then in the first instance the loss is offset against other income in the year, eg a job, for a tax refund. In some cases it may be carried forward or back to earlier or later tax years – talk to us for advice. Read our Guidance on Losses
Employment and Self Employment
If you are simultaneously employed and self employed then a few points to note:
- Income from both sources – and indeed anything else like rent, bank interest and dividends – are aggregated for Income Tax purposes
- All sources of income need to go on your Self Assessment
- National Insurance is not aggregated it is charged by source, although Self Employed NI is collected via the Self Assessment
Case Studies 1 and 4 help explain the integration of tax where you have Employment and Self Employment
Read our Guide to Tax and NI when you are Employed and Self Employed
Case Studies
Its easier with a Case Study – see some typical ones here Case Study Examples of Tax for a Yoga Teacher
