Self Employed Yoga Instructor? Here is our tax advice guide just for you. Whether you are starting out or just want to understand more about allowable expenses, here are some useful tips specifically for self employed yoga teachers.
THE FOUR ESSENTIALS OF SELF EMPLOYMENT
Let’s start by summarising the four essential elements of Self Employment:
- Visit the HMRC website and register as Self Employed
- Keep a list of all business income and expenditure (expenses)
- Complete Self Assessment before 31 Jan each year
- Pay any Tax and National Insurance due by 31 January each year (and payments on account by 31 January and 31 July each year)
Register with HMRC as a Self Employed Yoga Instructor
Whether you offer one on one sessions, group classes or yoga at events going self employed is the easiest way to kick start your career as a yoga instructor.
First things first, you must register with HMRC for Self Assessment and Class 2 & 4 National Insurance. This should be done as soon as possible after starting your business but HMRC rules are that you must register by 5 October in your business’s second tax year.
You can register as a Self Employed Consultant on HMRCs website here. Once this process is completed HMRC will send you a UTR number (Unique Tax Payers Reference). Keep this safe as you will need this code to file your Self Assessment Tax Return. As you are self employed you are required to pay tax under Self Assessment which means you need to submit a personal Tax Return by 31 January each year detailing your trading income, the income tax and Class 2 & Class 4 National Insurance due as well as making a payment for the tax and NI due. Your tax return submitted by 31 January covers the previous tax year. For example: your tax return due on 31 January 2018 details your trading income earned between 6 April 2016 to 5 April 2017.
Watch out, you are also required to make a payment on account to HMRC by 31 July each year too which is normally 50% of your previous years tax bill, so make sure you budget for this additional payment too.
It is also worth noting that if you already complete a Self Assessment Tax Return, for example because you collect rental income or have savings interest, that you need to complete a Form CFW1 to notify HMRC that you have a new form of income you need to report on. Again, you can do this online here and you will need your Unique Tax Payers Reference.
Your trading income, somewhat deceivingly, actually means your trading profits (all your income less all your allowable business expenses). Generally speaking, business expenses are only tax allowable if they are ‘wholly, necessarily and exclusively’ incurred in the performance of your business. All expenses must be supported by a receipt, so make sure you keep hold of all your paper or emailed receipts. But it is really important to be aware of which expenses are allowable because they will reduce your tax bill and incorrect claims can result in penalties.
Allowable Start Up Expenses for Self Employed Yoga Teachers
Starting any business usually involves some element of cost so it is worth understanding whether these expenses will attract tax relief before you start spending. Here is a list of typically allowable start up expenses relevant if you are a self employed yoga instructor:
Depending on where you hold your sessions you may need to get some of your own equipment for your clients. So, things like yoga mats, towels and foam rollers are all tax allowable so keep hold of your receipts so you can present them to your accountant at tax time.
Computer & Printer
We live in a digital age so if you use a computer or iPad for marketing, timetabling, research or class planning then this equipment, as well as your printer, will attract tax relief either as an allowable expense or under the Annual Investment Allowance rules.
A website is almost like a marketing brochure now and gives you a chance to tell the world more about the type of Yoga you offer and give people a feel for your style and personality as well as give people an easy way to book onto your sessions online. If you are considering investing in a website then it is worth noting that the website, domain and hosting again are all allowable expenses.
Allowable Ongoing Expenses for Self Employed Yoga Instructors
Once you have begun finding students you will being to incur expenses on an ongoing basis as you run your business. Here are some of the ongoing expenses you which you should look out for as a self employed yoga teacher and keep details of as they are generally tax allowable and reduce your tax bill:
The cost of a business phone is an allowable expense however if there is personal use then only a proportion of the contract costs can be claimed.
If you have a ‘uniform’ with your branding that you wear while you teach, then you should be able to claim for this cost. Normal clothing is not allowed and neither can you claim for the cost of washing powder.
Travel & Accommodation
Travelling is a common part of being a self employed yoga instructor, so if you have incurred the costs of taking a train or taxis for sessions then be sure to ask for your receipt as you should be able to claim this as an allowable expense.
If you have to use your car to travel to an client or to teach a class, then note down the mileage. This falls under the category of travel. So record you miles to and from your destination since you can claim 45p for the first 10,000 miles of driving and 25p thereafter.
Use of Home
If you choose to set up a yoga room at your home then there are rules that will allow you to claim an amount for the running costs of doing so as a portion of your household bills such as gas, water, electricity or rent. Make sure you have an idea of your household running costs to discuss with your accountant at tax return time as they will help you work out how much you can claim against your taxable income.
Alternatively, HMRC allows you to claim a flat rate of £4 per week for using your home for work purposes and you don’t need to substantiate this claim with receipts.
Note – If you choose to rent a room or premises you may not be able to claim for the cost of travel/mileage as this location may represent your place of work. Make sure you take professional advice before claiming for travel/mileage as incorrect claims can result in penalties.
Any marketing you do, flyers, paid ads or anyone you pay to help you with your marketing is also fully allowable so make sure you download receipts or ask your marketing assistant to send you an invoice before you pay them.
Business cards are a great way to connect with people and give potential clients your details. Again, these will be an allowable business expense.
Say you have a full day of teaching at an off site location and need to buy lunch you can expense reasonable meal costs such as lunch.
It is advisable that those that are self employed take out some form of insurance. Generally this insurance covers Public Liability Insurance, Products Liability Insurance and Malpractice. Again, these insurance costs will be an allowable expense.
You may opt to take courses to improve skills. These may be tax allowable so keep your receipts ready for when you need to submit your tax return. If you need to travel to your course or stay overnight as part of the training these costs are also tax deductible, as well as the cost of a basic meal for lunch/dinner. Take the time to collate your receipts or note down mileage so you can discuss your claim against your taxable income with your accountant.
Wages and Freelancers
If you need some assistance and support from other yoga teachers or freelancers, then the cost of these individuals will be tax allowable since they are an incidental cost of your project(s).
Accounting & Bookkeeping
Keeping accurate business records will help to avoid missing any entitlements or tax relief that you may be eligible for. Using a cloud based accounting software such as Xero, Quickbooks or Sage will make life easier, so if you do choose to sign up the cost of the monthly subscription is fully tax allowable. Then, if you choose to use an accountant to complete your self assessment tax return, again their fees will be an allowable expense. It is worth noting that keeping your business records in order will help keep your accounting fees at a minimum.
It is advisable to open a business bank account and keep your business and personal expenditure separate. The bank charges you pay on your business bank account is an allowable expense.
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