One of the biggest decisions tutors face when setting up their business is whether to register as self-employed or as a limited company. Both options have pros and cons, and the right choice depends on your income, long-term goals, and tax preferences. This guide breaks down the key differences to help you decide.
1. What Does It Mean to Be Self-Employed?
Being self-employed means you run your tutoring business as an individual. You’ll need to:
- Register with HMRC for Self-Assessment and file tax returns annually (Find out how here).
- Pay Income Tax and National Insurance on your earnings.
- Be personally responsible for all business liabilities and debts.
Pros of Being Self-Employed:
✔️ Simpler and cheaper to set up.
✔️ Less administrative work than a limited company.
✔️ Greater flexibility to manage income and expenses.
Cons of Being Self-Employed:
❌ You’re personally liable for any debts or legal issues.
❌ Tax rates can be higher if your income grows significantly.
❌ You may be perceived to have less credibility compared to a registered company.
2. What is a Limited Company?
A limited company is a separate legal entity from you as an individual. As a tutor, registering a company means:
- Your business has limited liability, protecting your personal assets in the event that something in the business went wrong (e.g. major legal dispute or business going bust).
- You pay Corporation Tax on profits instead of Income Tax (you still have to pay tax when you pay yourself personally).
- You must submit annual accounts and tax returns to Companies House (Learn more here).
Pros of a Limited Company:
✔️ Greater legal protection and credibility.
✔️ Potential tax savings if you earn a high income.
✔️ More attractive to corporate clients or schools.
Cons of a Limited Company:
❌ More paperwork and accounting requirements.
❌ Higher setup and running costs.
❌ More complex tax obligations, requiring an accountant.
3. Key Considerations When Choosing
- What about VAT? There is a VAT exemption for tuition delivered by sole traders or partners in a partnership. This does not apply to tuition delivered by a limited company even if you are the sole owner and director of that company. For this reason, many tutors deliver their own tuition as a sole trader even if they run a business separately.
- How much do you expect to earn? If your earnings are below £50,000, being self-employed is often simpler. Above this, a limited company may offer tax advantages.
- Do you want legal protection? A limited company shields personal assets, which is beneficial for tutors offering high-value contracts.
- Do you plan to expand? If you aim to grow your tutoring business into an agency or hire staff, a limited company may be the better option.
4. How TTA Supports Tutors
Whichever route you take, The Tutors’ Association provides resources to help you:
- Access **legal templates, contracts and compliance support** to protect your business (Explore legal resources).
- Get discounted insurance for liability and business protection.
- Stay compliant with industry standards, safeguarding, and tax requirements.
Final Thoughts
There’s no one-size-fits-all answer, but understanding the benefits and drawbacks of both self-employment and limited company status will help you make an informed decision. Consider your income, long-term goals, and legal protection needs before choosing the best structure for your tutoring business.
📌 Already a member? Log in to the TTA Member Area for more business resources.
📩 Have questions? Email info@thetutorsassociation.org.uk for more information.