This tax advice guide is for self-employed Zumba Instructors or anyone who is hoping to become one.
I’ll help you get to grips with all the key issues that will affect you when you are self-employed including:
- Registering with HMRC;
- Your responsibilities;
- What taxes you’ll need to pay;
- Deductions that reduce your tax bill;
- Bookkeeping and record-keeping.
What is Self-Employment
Self employment means that you work for yourself rather than for someone else. This means you:
- Are responsible for finding your own work;
- Decide when you want to accept a job;
- Need to have your own method of transport, mobile phone and equipment;
- Will not receive sick pay or holiday pay, so you will go without earnings during these times;
- Need to register as self-employed, work out your own taxes and send a tax return to HMRC.
You are not restricted to just being self-employed either.
You can even hold down a full-time job while working as a self-employed Zumba Instructor on the side.
Who Needs to Register for Self-Employment
Anyone who earns more than £1,000 in untaxed money needs to register as self-employed.
If you earn less that £1,000 you may be able to avoid registering for self-employment and paying tax on your earnings by taking advantage of the HMRC Trading Allowance.
Your Responsibilities Once You’re Registered as Self-Employed
Once you are registered as self-employed you’ll need to report to HMRC on your earnings, calculate your own taxes and pay them over.
This is known as self-assessment and you report your earnings and taxes on a self-assessment tax return form.
Your self-assessment tax return form needs to be filed by 31 January each year and it includes all your earnings for the previous tax year.
A tax year runs from 6 April to 5 April.
For example, your tax return for 6 April 2018 to 5 April 2019 (2018/2019) is due by 31 January 2020.
What Taxes Do Self-Employed Zumba Instructors Pay
You will need to pay Income Tax, Class 2 and Class 4.
The amount of each you pay depending on your earnings
Earnings mean all the money you are paid as a Zumba Instructor
You’ll need to pay any taxes you owe by 31 January each year, along with a Payment on Account depending on how much you earn.
A payment on account is a contribution towards your nexts years tax bill.
There is often a misunderstanding amongst self-employed Zumba Instructors that their earnings are somehow tax-free so they can work without any tax obligations.
This is not true.
All Self Employed Zumba Instructors must register with HMRC and declare their earnings.
Earnings may be tax-free because you earn below the personal allowance but you still need to fill out a self-assessment tax return form.
Tax Deductible Expenses for Self-Employed Zumba Instructors
Claiming for all your expenses is the easiest way to reduce your tax bill.
Here are some typical allowable expenses for self-employed Zumba Instructors:
- Equipment like workout mats;
- Marketing and advertising;
- Phone and Data;
- Use of home if you choose to work from your house either as a flat rate or a portion of your household bills gas, water, electricity or rent.
- Branded clothing and protective wear;
- Travel to clients when you use a taxi, tube or bus;
- Mileage for using your own car;
- Training to keep your skills up to date, along with incidental travel and food costs or overnight stays;
- Accounting & bookkeeping;
- Bank charges for a business bank account.
There may be expenses you pay for that you use personally, like your mobile phone.
So if you use your mobile phone for 60% work and 40% personal, then you take 60% of the total costs to put against your taxes.
Disallowable Expenses for Self Employed Zumba Instructors
After years of people pushing the boundaries and claiming for some questionable expenses, HMRC have a growing list of expenses that are disallowable.
Here are some common examples of disallowable expenses for Self Employed Zumba Instructors:
- Parking fines;
- HMRC penalties and interest;
- Training for new skills;
- Travel and mileage between your home and base of work;
- Non branded clothing;
- Entertaining Clients or Hospitality at Events;
- Lunch, unless in special circumstances;
Tax Reliefs and Allowances for Self-Employed Zumba Instructors
Taking advantage of tax reliefs and allowances is another way to reduce your tax bill.
Typical tax reliefs and allowances that you may be entitled to include:
- Personal allowance which is the tax-free amount everyone is entitled to earn;
- First-year allowances on tools and equipment;
- Marriage allowance.
Looking for more ways to Reduce Your Tax Bill? Then read this post
Bookkeeping and Record-Keeping When You’re Self-Employed
One of the keys to reducing your tax bill is to stay on top of your bookkeeping and tacking all your expenses.
You’ll also need to make sure you keep all your receipts support all the expenses you want to claim, as well as details of what you have been paid.
The simplest way to do this is to:
- Open up a separate bank account for yourself and set this to send/receive any payments. That way when tax time comes you has a record of everything that has happened.
- Save all your receipts and reports using a bookkeeping app.
Quickbooks is a great option for self-employed people since you can photograph and store your expenses on the go, as well as using the app to automatically track your business mileage.