Am I an employee, self-employed or both?
A simple guide to common tax problems
Am I employed or self-employed?
Avoid unexpected bills or enquiries from HMRC by making sure you understand if you are employed or self-employed
If you are an employee tax is automatically deducted from your payslip every month. You don’t usually have to contact HMRC unless:
- Your tax code is wrong (find out about tax codes here) and you get a letter from HMRC
- You are self-employed as well as employed
- sometimes when you want to claim expenses, have several jobs or other sources of income (eg income from renting your property ).
- These complications may mean you have to fill in a self-assessment tax return (find out why you might need to file Self Assessment here).
If you are self-employed this means that you work for yourself either as a sole trader (with or without employees or sub-contractors working for you) or in a partnership. You still need to pay tax and to do that you will need to report your earnings to HMRC so that your tax can be calculated. You will need to keep records and report your earnings through Self Assessment.
Things to remember
- You can be both employed and self-employed at the same time.
- If you are a sub-contractor in construction you are self-employed even though usually your main contractor will give you a certificate showing tax paid on your earnings.
- If you work through an agency, their paperwork will explain how you are paid, it could be with a salary, the same as an employee. Or there could be a dividend with the salary. You might be working for your own or an umbrella company, or there might be another arrangement. Make sure you understand the paperwork, because if the agency doesn’t complete the right forms or pay the right tax you may still have to pay the tax owed, penalties and interest.