What if you are self employed

This page is for you if you want more information on your employment status that is, whether you are employed or self-employed and you are someone who is, or will be, providing services in your individual capacity.

You should be aware that the information in this section relates to employment status for tax purposes only. It is possible you may have one status for tax purposes but have a different status for other purposes, such as employment law purposes. Some general information on deciding employment law status and what rights the different statuses give you, can be found on GOV.

ACAS can also be contacted for free support and advice on employment law issues. Both tax and employment law in this sphere is developing as the way we work is changing and there are currently a number of government reviews being undertaken into the whole area.

Therefore, we expect the law in this field to continue to evolve over the coming months and years as different situations are considered as they arise by either government, the Courts or both. This section will continue to be updated for any major changes as necessary. Whether you are employed or self-employed will make a difference to the amount of tax and NIC you have to pay, as well as how you pay it. If you think that you are employed, you need to look at pages within the employment section for more information about your tax position.

If you think that you are self-employed, you need to look at pages within this self-employment section for more information about your tax position. It is important to know if you are employed or self-employed for employment law purposes too. Those who are employed or self-employed under tax law will usually be employed or self-employed for employment law, but not always. Finally, it is important to know if you are employed or self-employed because your tax credits or universal credit status may also follow your employment status for tax purposes.

In certain circumstances, HMRC could demand the PAYE payments that should have been made by the business from you if they believe you should have been treated as an employee and were not, although they should approach the business first. Instead, make sure you understand your employment or self-employment status for yourself before you start work.

If you think that something is wrong, you might want to challenge the business that is offering you the work or contact HMRC. There is no straightforward legal definition of what it means to be employed or self-employed. Over the years the law courts have looked at this question many times, and they have identified some situations in which you are definitely employed and others when you are definitely self-employed. But there are other situations where the position is not clear. If it is still not clear, then you need to consider a lot of different factors and then look at the overall picture that emerges more on this below.

Whether you are employed or self-employed is not a matter of choice; it depends on the circumstances. We look at each of these types of activity in this section. You can be employed even if you only work part time or have flexible hours or if you are only on a short contract. But if you have a lot of short contracts which you organise and set up yourself, you are more likely to be self-employed. See also the table below.

None of these tests are conclusive. You have to weigh a number of different factors together to get an overall picture — see the table below. Note that you will not automatically be self-employed just because you have an existing Unique Taxpayer Reference UTR and submit tax returns each year, your position lacks permanency, or you provide your own small tools.

If you are still not clear you should consider the factors set out in the table below. You should consider all the questions and then look at the overall pattern which emerges. Does it suggest employment or self-employment? You may also find it helpful to look at the important case section to see how the courts might apply the tests in the table in real life. Note that the law here is complex — we have tried to simplify things, but this is not a comprehensive guide.

If you are still not clear, you should ask a tax adviser or HMRC for help. We tell you how you can find a professional tax adviser, including through the tax charities, in our getting help section. HMRC have a factsheet that will help you check your employment status.

It will ask you a set of questions about your situation and at the end it will give you an indication of your employment status for tax, which you can print off and then show your engager if necessary. To access the part of the tool that deals with general status queries you need to click on 'If some work is classed as employment or self-employment for tax purposes' in answer to the first question What do you want to find out?

Although HMRC have tried to make the tool as user friendly as possible, there is also some quite technical language used in the questions, which can be confusing. For example, one of the questions asks whether the worker is an office holder. There is some guidance to help you use it in HMRC's Employment Status Manual , including a glossary of terms and help understanding what each question is getting at. Note, that the CEST tool should not be used to try and work out a status for employment law purposes, only tax purposes.

It also covers a wide range of other issues on which workers are likely to have questions including:. There is a common misconception that people who work in the construction industry are always self-employed.

This is not the case. People who work in the construction industry should work out their employment status in the same way as everyone else. If you are being treated as self-employed but you do not think this is right, you might want to challenge the business that is offering you the work or contact HMRC.

You can find out more about the construction industry and CIS on our website. A partnership or firm if you are based in Scotland is an entity which can be used to run a business. The partners who can be either individuals or companies personally share responsibility for their business.

Although a partnership can be formally set-up using a Partnership Agreement, it is also possible to be ran informally through an understanding between all the partners.

Apart from in Scotland, a partnership is not a separate legal entity like a limited company see below. Scottish partnerships are a separate legal entity and can own property in their own right. There are additional tax responsibilities if you are a partner in a partnership and these are explained in our guide to self-employment which covers:.

There is further information on setting-up a partnership and registering a partnership on GOV. There is more information on what your position is if you set up a limited company in the employment section. There is information on what your position is if you are working through an agency or umbrella company in the employment section. You can be employed and self-employed at the same time.

This would usually be the case if you were doing two jobs. For example, if you work for yourself as a hairdresser during the day but in the evenings you work as a receptionist in a hotel, you will be both self-employed and employed.

If you think that you are both employed and self-employed, you may need to look at other pages within the self-employment section, and also pages within the employment section for guidance on your tax position. In a nutshell, you pay tax on your employment income through PAYE and you pay tax on your self-employment profits via the Self Assessment system. See our page How do I pay tax on self-employed income? Examples might be if you are a volunteer, if you are training, or if you undertake an activity on a one-off basis.

You may be gaining work experience by volunteering. A typical arrangement in such cases is that you give your time for free, but the organisation might reimburse out-of-pocket expenses such as travel costs, or perhaps provide accommodation or meals while you are on site. However, even if you are not paid for the actual work you do, you may be paid expenses to compensate you for some of the costs associated with volunteering. These can include things like:. Broadly, if you are reimbursed any actual out-of-pocket expenses you have incurred then there will be no tax or National Insurance contributions NIC to deal with for either you or the charity paying you.

However, if you are reimbursed expenses above the amount actually incurred or are given any other payment, then there may be tax and NIC consequences to think about. What those consequences are will depend on whether you are classed as an employee of the organisation you are volunteering for or not. If you volunteer on a regular basis, carry out specified duties and are subject to some level of supervision and control, a number of the hallmarks of employment will be present.

However, there could be other factors pointing away from employment - for example, if you only help them out occasionally, you are free to turn down helping them out and you can stop or leave when you wish.

Please bear in mind that an employment relationship need not be set out in a written contract; rather, it can be oral, or inferred from the circumstances. If you are not an employee of the organisation that you volunteer for, then the income may nevertheless be taxable on you, but as casual income not employment income more on this below.

There are examples on GOV. UK which highlight some of the tax issues which can arise when you are volunteering. If you volunteer while claiming state benefits, you also need to check that there is no effect on your claim.

You can find out more about this on GOV. You can change your cookie settings at any time. You can be both employed and self-employed at the same time, for example if you work for an employer during the day and run your own business in the evenings. You could be classed as a trader if you sell goods or services. If you only occasionally sell items or rent out property for example through auction websites or short-term rental apps , check if you need to tell HMRC about this income. You can get help with setting up or growing your business , for example with funding your idea.

There are other ways to work for yourself. Check if you should set up as one of the following instead:. You can register a trade mark if you want to stop people from trading under your business name.

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