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Is Your Tax Status Self Employed or Employed ?
Peter JonesHow can one establish if you are Self employed or an employee for UK tax purposes.
There is no actual or legal definition of what employment or self-employment is and it is based on previous judgments which are commonly referred to as ‘case law’.
There are some key points to take into account in deciding the status of an individual for Income Tax purposes in the UK.
Self employed business traders have various key distinguishing pointers and that self employed persons are able to :-
Manage and operate their own business taking all the required key decisions.
Take full responsibility for the success or failure of their business.
Decide how, where and when they carry out their work.
Hire other persons to do the work that is required the cost of which is borne by them.
Provide the plant, equipment and motor vehicles that is used to carry out the work
They are free to take holidays and time off when they want to.
Usually have more than one client or customer at the same time. This is not always the case as some trades such as motor cycle courier are treated as self employed but may only be providng services for one courier service on a subcontract basis. I will explain this in more detail later in this article
People who are employees will usually:-
Work for one employer at a time and they (the employer) are in charge of the work that is done by the employee. They could how ever have two employments perhaps a day job and a week end job.
Are directed by their employer as to how to carry out their duties and as to when and where they perform your work.
Will be required to work a pre set amount of hours each and every week.
Will qualify for paid holidays but can only take these holidays in line with their terms of employment as regards their length and timing.
Will benefit from being remunerated at the same fixed amount depending on the hours that are actually worked, and get paid for working overtime.
Casual work or work of a part-time nature can still be classed as either employed or self-employed depending on the facts. The fact that a position may be either casual or part time has nothing to do with their employment status.
Self employed motor cycle courriers despite possiby only provding services for one courier company they are generaly treated as self employed because of how they work. They have no guarantee of work and are dependent on work being allocated to them. So if there is no work they do not get paid and then they must be classed as self employed. They supply their own Motor Cycles and pay for their own fuel and running costs.
It is,of course, possible to be both self-employed and in self employment simultaneously in that one could be working for an employer during the day and involved in running your own self employed business at the week ends or in the evenings.
Each contract either of service or of employment must be considered independently on its merits.
As mentioned it is possible that one could be both self-employed under a contract of service and be an employee under a contract or employment.
If you are not sure you should take professional independent advice from an Accountant or somebody who specialises in this. My experience is that if you go to the tax office they do not have much real knowledge and always tend to suggest that one is an amployee. That way they keep their jobs and collect more tax for the Govenrment.
Whether one is an employee or self-employed depends simply on the facts of the actual working arrangements and the terms and conditions contained in the contract as these factors all need to be considered at the same time.
If you are self employed then,of course,you will be responsible for your own tax and National Insurance contributions.
You will need to advise HM Revenue & Customs (HMRC) by registering with them within 3 months of commencing employment. It is possible to download a registration form from the HMRC web site or you can can register by making a call to the Newly Self-employed Helpline on 0845 915 4515 which is open 8.00 am to 8.00 pm Monday to Friday and 8.00 am to 5.00 pm Saturday and Sunday.
You will also need to file a Self Assessment tax return with in the required time limits and make payments as required for both National Insurance and Income Tax
If you are employed then the burden for actually deducting and paying your tax and National Insurance contributions will fall on your employer. This will be dealt with by under the PAYE (Pay As You Earn) system. With this tax system you need to ensure that you have been given the correct code number and are not on an emergency or week 1 basis.
If you are,then quite oftenly, you are taxed either on a week 1 code or on emergency tax which means that you will often be over taxed and usually will be due a tax refund at the end of the the tax year.
The Author writes many articles on Income Tax and for more information please go to