This Content Was Last Updated on November 23, 2023 by Jessica Garbett
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
The profits are entered on your Self Assessment Return, along with any other taxable income.
The tax rates (2023/24) 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.
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 (2023/24):
- Class 2 – £3.45 a week – exemption given if you earn less than £12,570 profit
- Class 4 – 9% on profits between £12,570 and £50,270 and 2% on profits over that level.
- Both types of NI are payable on business profits, and are collected with Self Assessment.
Classes 2 and 4 NI are dealt with via the Self Assessment. Note Class 2 NI is to be abolished from 2024/25.
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 Classes 2 and 4 is collected via the Self Assessment
Case Studies 1 and 4 help explain the integration of tax where you have Employment and Self Employment
Its easier with a Case Study – see some typical ones here Case Study Examples of Tax for a Yoga Teacher