The UK tutoring market alone is estimated to be worth as much as £6 billion. Online tutoring has also proved to be a key driver of this growth, especially since the beginning of COVID-19.
The global tutoring market is even more impressive! In their latest report, Technavio estimates the market to be worth as much as $60 billion by 2023. Tutoring is also very varied, meaning there is a place for anyone who is interested in starting a tutoring business. Working with students is very inspiring and what’s more, it can prove to be very lucrative!
If you are considering starting a tutoring agency or becoming private tutoring, you probably have lots of questions. You can find some of the most frequently asked quetions below!
Do you need a license to start a tutoring business?
When starting a tutoring business, there are two common set-ups: becoming a sole trader or registering as a corporation.
Required Licenses: Both in the UK and the US there are no specified licenses you need to get as a tutor. However, there are a number of best practices most agencies follow. If you are working with children you will also have to consider existing safeguards and background checks that might apply in your county. (See What qualifications do you need to start a tutoring business (UK/US)? below.)
Registering as a sole trader: Depending on your location registering as a sole trader will be slightly different.
In the UK you will need to make sure you register with the HMRC and declare yourself as a sole trader. Even if this is only part-time you will still need to do so. To begin with, most tutors start out working on their own, keeping track of their own expenses, and doing their own tax returns.
If you are a tutor based in the UK you will need to hand in your tax returns every year after the 5th of April. The HMRC requires you to declare yourself a sole trader by the 5th of October in your second tax year. Declaring this status will give you a Unique Tax Reference (UTR) number.
In the US you can register to be a sole trader through the IRS. You must list your business’s profits or losses information on Schedule C, which needs to be submitted along with Form 1040. As a sole trader, you will also need to keep your own tax recorders and ensure that your personal finances are kept separate from your business.
If you are a tutor based in the US, you will need to contribute to the Social Security and Medicare system. This is the equivalent of the payroll tax which would usually be taken by your employee. However, unlike payroll tax, you will need to pay the full amount of contributions yourself, since you don’t have an employer who pays half.
Registering as a corporation: This option requires a slightly different tax set up. The tax year begins on April 6th and ends on April 5th the following year.
If you are based in the UK, you might need to pay some or all of the following taxes:
Corporation Tax: This is tax paid on any profits your business makes. It must be paid 9 months and 1 day after your account period ends. Since for most corporations, this is March 31st, you will most likely have to pay your corporation tax on January 1st.
Income tax: Even if you are a business owner, you will need to pay taxes on any personal income you get from your tutoring agency. This is usually paid through your business’s PAYE scheme.
National Insurance: This tax helps build up state pensions, and pay for public services. This service, like your income tax, is paid through the PAYE scheme.
VAT: Value added tax (VAT) is paid on goods and services provided by a company. Your business does not automatically get registered for VAT. If your business makes more than £85,000 a year you will need to register for VAT.
In the US, paying tax as a business also varies from being a sole trader. Here are the main forms of tax you may need to pay:
Income Tax: As a corporation, you must pay taxes based on your income after paying all business expenses. Depending on what type of business your company is registered as you will likely have slightly different tax setups.
Payroll Tax: If your agency employs tutors you will need to pay your contribution on Medicare and Social Security for each employee. This will likely include both state and local taxes.
Excise Tax: This tax is dependent on what industry you're within or what service you provide. Most of the time Excise Tax is included in the price paid by the consumer.
Sales Tax: Whether you have to pay sales tax will be dependent on where you are based. Since there is no federal sales tax, your tax bracket will be location-dependent. As a business owner, it will be your job to calculate, collect and disclose your sales tax.
Property Tax: If you own a physical location where your tutoring takes place, you will need to pay property taxes.
What qualifications do you need to start a tutoring business (UK/US)?
While there are no definitive rules qualifications needed for starting tutoring classes, a lot of tutors and agencies will have specific requirements for a person to join their team. This might include academic qualifications or certificates about a person's background.
It is typical for agencies to ask for:
- Speicifc qualifications
- A background check certificate (this may vary based on your location)
- Any specialised qualifications for the subjects you will teach
- In-house testing of your knowledge
How do I obtain a background check for starting a tutoring business?
If you are working with minors within your tutoring business, you will likely need a criminal record and background check. Depending on your location these can be acquired in different ways.
In the UK you can easily acquire a background check online using the UK Government website. A backround check is required if you are working with people under the age of 18.
All you need to apply for the check is:
- Records of your address and where you have lived in the past 5 years.
- Your National Insurance Number
- Your passport
- Your driving license
There is also a small fee (£23) you will have to pay when getting your DBS check. This too can be processed via the government website. The check will typically take around 6 weeks.
The US Law requires that you have a comprehensive background check if you are working within a business that interacts with minors. This means anyone employed by a tutoring agency needs to get a background check. This includes people who are not directly involved in giving tutoring or interacting with minors.
A comprehensive background check includes the following specific requirement:
- FBI fingerprint check
- Checking for your name on the National Crime Information Center’s National Sex Offender Registry
- A comprehensive search of every state and region-specific database where a tutoring agency employee has lived in the past 5 years.
How much does it cost to start a tutoring business?
It is quite difficult to estimate how much it will cost to start a tutoring business. As with any other business venture, there are a number of practical considerations you should keep in mind. Depending on your business the cost of setting up your business can vary greatly.
For example, if you are planning to tutor students face to face you will need to consider the cost of hiring a location or travel costs. Alternatively, if you want to tutor online, you will need to think about tools to aid your tutoring.
When estimating the cost of starting your tutoring business keep in mind:
Initial start-up costs: With any business, you will likely not be profitable when you first begin your venture. However, this shouldn’t discourage you! Making sure you have a financial safety net (whether that is a reliable income or savings) will give you the ability to put your time into your new business instead of stressing about your finances.
Your online presence and branding: If you are planning to tutor online, having a website is crucial. If you are unfamiliar with website design and creating company branding you might want to consider hiring a freelance web designer or a branding expert. Designers and marketers can cost a variety of pricing depending on their experiences. This means regardless of your budget, you will likely find someone talented and happy to help!
Tools you may need to invest in: Aside from your website, you will likely also need to invest in some administrative and organizational tools. Most businesses use specialised tutor management software. If you are teaching online, you might also want to invest in an online whiteboard platform to make teaching more engaging.
Travel and location costs: Depending on the setup of your business, you may need to pay for a location where tutoring takes place. Alternatively, if you are a mobile tutor, you will need to consider the cost of traveling to meet students.
Can you run a tutoring business from your home?
Yes! As a business owner, you can tutor students from your home. However, it is important to keep in mind that you must make sure the space is safe.
How can I make sure my tutoring business is successful?
While there is no recipe for success when it comes to starting any business, there are a few steps you can take to safeguard yourself. Here are a few of the key checks you can consider:
Explore the tutoring market and find your niche: The most important part of creating a successful tutoring business is making sure that you like the industry. Since you will have to spend lots of your time within the sphere of tutoring, making sure you love it is essential.
Once you have figured out that tutoring is for you, look into researching the marketing a little further. Is there an area you can help out with specifically? Is there a certain gap in the market you would be able to fill? Identifying this can help your business grow.
Make sure you have the right tools: Since you are trying to run an online tutoring business, you need to make sure you have the right tools to organise, host, and bill for lessons.
It is a great choice for any new agency to start using tutor management software, such as TutorCruncher. This system is specifically designed with the needs of tutoring agencies in mind. TutorCruncher also integrates with online whiteboards which can help you engage tutors better online!
Consider your competitors: Aside from finding your niche within the business, it is also important to identify competitors. Other businesses within the same sphere can help inform business decisions. Furthermore, they can help you understand what resonates with potential customers.
How do online tutors and tutoring agencies find students?
Finding students online as a private tutor or tutoring agency can seem daunting. However, there are a number of easy ways you can promote your business, get traction and find new students.
What's more, most of them are free!
Reach out to people you know: One of the best way to find new students is to get in touch with people you already know. Do you have a friend whose child might need tutoring? Why not get in touch and offer them a free first session.
Advertise on social media or via forums and groups: Promoting your business on social media is cheap and effective. You can set-up targeted Facebook or instagram ads that are shown to the niche market you are trying to tap into. With a bit of luck, you will also be able to find forms or social media groups that already exist where you can promote your business and get the word out!
Make sure your online presence looks professional: Ensure that anyone coming to your website or social media page is shown a professional and up-to-date online presence. Make sure your website is functional, and your social media branding is strong. You can use simple website plugins to make lesson booking and contact easier.
Rely on the power of word of mouth: If you are offering high-quality service you will likely be able to tap into the power of word of mouth promotion. Encourage your existing customers to spread the word about your business. You can also incentivise them more with simple discounts and promotions if they bring a friend on board.
Want more tips about tutoring online? Why not read our latest blog!
Are you looking for an all-inclusive management solution for your tutoring agency? Try TutorCruncher for free today!