PhD Stipend (Tax Free) + Private Tuition Earnings Read more at http://www.taxationw

GSMAnon

Hi there.

I'm completely new to the income tax game, and I have a few questions regarding my situation at the moment.

I'm currently a PhD student, and receive just over £13,500 as a PhD "stipend". This is tax free, and is paid to me by the University, although the funding for the PhD is provided to the university by a research council.

I started private tutoring last year as a way to make a bit of extra cash. In addition, I also do some teaching/tutoring/invigilating/lab demonstrationg at the University as part of my PhD duties, but I am paid for this in addition to my PhD stipend, and I believe that this income is taxable.

My income from private tutoring and tutoring, etc, within university, do not exceed the personal income tax allowance (if only!).

So, my questions are this:

1) Does that fact that my TOTAL income is above the tax threshold mean I should be paying tax on it, even though the vast chunk of it (~£13,500) is from my PhD stipend which is, as I understand it, tax free/non-taxable?

2) Should I declare my income from private tuition via self-employment self-assessment tax return, even though it does not exceed the tax threshold?

3) How does my payment from the university for teaching, etc, get declared - I take it the university will declare this income, but how can they decide whether not it should get taxed based on my other self-employed income (just hypothetical - since it would never be above the treshold anyway!)?

4) If I have to register as self-employed, does it matter when I register, just as long as it's before the end of the tax year on April 05 2013? I didn't start tutoring until after April 06 2012 so there is no undeclared income previous to this date. Is there a deadline between when you start earning money from self-employment and when you must register as self-employed, and if you exceed it, what happens?

5) I charge my tutees both a tutoring fee and a fuel cost fee if they request that I come to them for the sessions. If I did go above the tax threshold, would both of these be fees be taxed, even though one isn't technically profit, it's just me covering my travel costs?

6) If I register as self-employed, how does VAT work? Do I need to charge my students VAT on top of the fee? Can I then claim back VAT on business expenses like my fuel, etc?

7) What do I count as when it comes to getting a mortgage or car insurance, etc - would I be able to state that I'm "self-employed" even though most of my earnings and most of my time is spent in full-time education?

8) Anything else you can advise me on?!
Garrie

CLAPTON

1. your stipend is tax free; it doesn't therefore form part of your taxable income so you don't ned to declare it to HMRC or include it in any tax calculation

2, you need to tell HMRC as soon as you start private tuition. You are liable for both tax and NI on your earning although it practice there may be no tax to pay. You will probably be able to register for low income exemption for NI purposes otherwise you need to pay class2 NI on a DD basis.

3. your Uni will tell HMRC about your earning; you will need to include all details in your self assessment

4. you should already have registered as self employed

5. HMRC will allow you to offset mileage at a rate of 45p per mile for the first 10,000 miles;

6. no vat

7. you need to ask your mortgage company

8. are there no other poeple at Uni doing the same thing that you can get useful input from (don't necessarily believe everythiong they say but anyone 2/3 years down the line should have some useful info.

you need to tell HMRC once you start earning from

GSMAnon

CLAPTON wrote: »

1. your stipend is tax free; it doesn't therefore form part of your taxable income so you don't ned to declare it to HMRC or include it in any tax calculation

2, you need to tell HMRC as soon as you start private tuition. You are liable for both tax and NI on your earning although it practice there may be no tax to pay. You will probably be able to register for low income exemption for NI purposes otherwise you need to pay class2 NI on a DD basis.

3. your Uni will tell HMRC about your earning; you will need to include all details in your self assessment

4. you should already have registered as self employed

5. HMRC will allow you to offset mileage at a rate of 45p per mile for the first 10,000 miles;

6. no vat

7. you need to ask your mortgage company

8. are there no other poeple at Uni doing the same thing that you can get useful input from (don't necessarily believe everythiong they say but anyone 2/3 years down the line should have some useful info.

you need to tell HMRC once you start earning from

Hi there,

Thank you so much for all of your answers, very much appreciated! I just have a few small follow up questions based on what you've said:

Okay, so if I register for self-employment NOW, and tell them that I've been tutoring for a few months now, will I incur any penalties for not having told them immediately? I still have all my receipt book and records of my earnings, and I didn't start earning before the beginning of the current tax year, so it's not like they'll be losing out on anything if I register now, right?

Also, for the travel expenses - when you say they offset at 45p per mile, do you mean that 45p per mile of travel is tax deductable? Does this mean that I shouldn't be charging my clients for the travel expenses? And what if I don't pay any tax in the first place because I'm under the threshold - that means I can't "deduct" the 45p per mile, and should still be charging the clients for it, no?

And finally - this is something I forgot to ask in the original post: sometimes my clients round up their fee, give me tips, etc. Are these tips/round ups to be recorded and are liable for tax, or can they be pocketed and ignored for tax purposes?

John_Pierpoint

You are self employed so the tax system regards you as trying to make a profit.
Your income is what you invoice to your customers and your expenses are what ever they are. The tax man is not usually at all interested in what you put on your invoices unless you add VAT to the bill. Unless you are offering a zero rated service, so thus being able to reclaim all your input tax on your expenses, you probably won't want to register to charge VAT until you are forced to do so.
http://www.accountingweb.co.uk/article/budget-2012-vat-changes/525690

Rather than haggle over the costs of running a car, and how much of that cost was for your private use, keeping a diary of your business journeys from your normal place of business (ie your home) and then showing a cost of £0.45 per mile in the expenses part of your accounts (spreadsheet?) is acceptable.

On this part of the forum you will find people with much more creative ideas of business costs: laptops, heating and lighting, a fraction of the rent, etc etc etc but the effort you (or your accountant) puts into this might not be cost effective, when compared to the extra money you could invoice by doing some more tutoring during that time..

It is a good idea to have a bank account through which all your billings and most of your expenses are channelled - you will of course keep receipts for those expenses, including those bought for cash (eg a bargain pack of envelopes and a dozen stamps).

[I once had a small business man metaphorically crying on my shoulder about his *!>*%!?!! of a tax inspector. In a rush to be away for Xmas, he had inadvertently bought his wife's present using the credit card he kept for business purchases.
The hawk-eyed inspector had spotted this and suggested that now he should investigate all the other accounts the tax payer might have.]

GSMAnon

John_Pierpoint wrote: »

You are self employed so the tax system regards you as trying to make a profit.
Your income is what you invoice to your customers and your expenses are what ever they are. The tax man is not usually at all interested in what you put on your invoices unless you add VAT to the bill. Unless you are offering a zero rated service, so thus being able to reclaim all your input tax on your expenses, you probably won't want to register to charge VAT until you are forced to do so.
http://www.accountingweb.co.uk/article/budget-2012-vat-changes/525690

Okay, turns out private tuition is zero-rated anyway... not that I would ever exceed £77,000 turnover anyway!

Rather than haggle over the costs of running a car, and how much of that cost was for your private use, keeping a diary of your business journeys from your normal place of business (ie your home) and then showing a cost of £0.45 per mile in the expenses part of your accounts (spreadsheet?) is acceptable.

Okay, and how do I recover this expense from the tax man IF I'm not paying any tax in the first place - because I'm not above the threshold? They're not going to GIVE me 0.45p per mile are they?

In any case, are we saying that I should not charge my clients travel expenses and should instead seek to recover such expenses through the taxman?

On this part of the forum you will find people with much more creative ideas of business costs: laptops, heating and lighting, a fraction of the rent, etc etc etc but the effort you (or your accountant) puts into this might not be cost effective, when compared to the extra money you could invoice by doing some more tutoring during that time..

Interesting...

It is a good idea to have a bank account through which all your billings and most of your expenses are channelled - you will of course keep receipts for those expenses, including those bought for cash (eg a bargain pack of envelopes and a dozen stamps).

Good point, I should probably designate one of my accounts as a business account.

[/quote][I once had a small business man metaphorically crying on my shoulder about his *!>*%!?!! of a tax inspector. In a rush to be away for Xmas, he had inadvertently bought his wife's present using the credit card he kept for business purchases.
The hawk-eyed inspector had spotted this and suggested that now he should investigate all the other accounts the tax payer might have.][/QUOTE]

Seems a bit harsh.

CLAPTON

the tax man doesn't give you 45p per mile
they will allow 45ppm as a business expense against your turnover so your profit is reduced

so if you pay no tax or NI then the 45ppm doesn't actually help you


what sort of money are you making?

GSMAnon

CLAPTON wrote: »

the tax man doesn't give you 45p per mile
they will allow 45ppm as a business expense against your turnover so your profit is reduced

so if you pay no tax or NI then the 45ppm doesn't actually help you


what sort of money are you making?

Month by month it varies a lot - not a lot of people want private tutoring during the summer, so it's a dead business from say May to August.

September to December is pretty busy, as is January to April, where I can sometimes make £1,000 pm there, but a good average is probably closer to £800.

All in all, I'll make around £5,000 in total from April-April.

agrinnall

A lot of people do use one of their personal accounts as their business account, and for small amounts it'll probably go unchallenged, but you should be aware that it will almost certainly be in breach of the T&Cs for the account. After all, the bank can make money from you if you open a business account, so they won't want you getting free banking instead.

CLAPTON

if your earnings are less than 5,596 you can apply for small earnings exemption from NI; otherwise you pay 2.65 per week by direct debt

Savvy_Sue

CLAPTON wrote: »

if your earnings are less than 5,596 you can apply for small earnings exemption from NI; otherwise you pay 2.65 per week by direct debt

I think by 'earnings' CLAPTON means 'profit', ie you take what you're paid gross, deduct your expenses (mileage, plus whatever you've spent on materials, maybe a bit for use of home, as indicated by John_P).

That's worth remembering because your 'best guess' seems to be £5000 so you need to keep that exemption limit in mind.