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Money, tax and benefits

Money, tax and benefits

Work out if you're employed or self-employed

Whether you're employed or self-employed depends on the terms and conditions of your work. It's important to know your employment status because it affects employment and benefit rights, and also how much tax and National Insurance you pay.

Basic checks to help you decide

You can usually work out your employment status by asking a few straight forward questions.

You are probably self-employed if you:

  • run your own business and take responsibility for its success or failure
  • have several customers at the same time
  • can decide how, when and where you do your work
  • are free to hire other people to do the work for you or help you at your own expense
  • provide the main items of equipment to do your work

You are probably employed if you:

  • have to do the work yourself
  • work for one person at a time, who is in charge of what you do and takes on the risks of the business
  • can be told how, when and where you do your work
  • have to work a set amount of hours
  • are paid a regular amount according to the hours you work, and get paid for working overtime (even if you do casual or part-time work, you can still be employed)

You can also be employed and self-employed at the same time, perhaps by working for an employer during the day and running your own business in the evenings.

Think about each contract separately: you may find that you are self-employed for one but employed for another.

You can get more detailed guidance from HM Revenue & Customs (HMRC) website, including access to the Employment Status Indicator (ESI). The ESI gives you a view on whether you are employed or self-employed based purely on the information you provide.

If you are still unsure, you should ask to talk to the Status Officer at your Tax Office. There's no legal definition of employment or self-employment, so if there's a doubt about someone's status the decision is made by referring to previous judgments (known as 'case law').Whether you are employed of self-employed depends upon the facts of your working arrangements, what your contract says or a combination of both.

If you are self-employed

You are responsible for your own tax and National Insurance Contributions (NICs). This means telling HMRC about your income by filling in a Self Assessment tax return.

You must register as self-employed with HMRC within three months, or you could pay a penalty.

You can download a registration form from HMRC website using the link below, or you can register by phoning the helpline for the newly self-employed on 08459 15 45 15 (open 8.00 am to 8.00 pm Monday to Friday and 8.00 am to 5.00 pm Saturday and Sunday).

Depending on what type of NICs you pay, you may lose the right to certain benefits, statutory payments, employment rights and the additional State Pension.

If you are employed

If you are employed your employer is responsible for deducting and paying your tax and NICs through the Pay As You Earn (PAYE) system. You are also entitled to certain rights and benefits, such as maternity or paternity leave, sick pay, Jobseeker's Allowance if you lose your job and a State Pension (including the additional State Pension) when you retire.

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