Your employment status affects your benefit and employment rights, as well as the tax and National Insurance that you’re expected to pay. Self-employed and employed individuals are taxed in different ways and it is important to know your status. For contractors, you may need to know whether you are employed or self-employed to avoid falling foul of IR35 legislation. There are some checks which you can carry out to determine your status.
Are you employed?
A person who is employed will usually have to carry out their tasks themselves and aren’t in a position to enlist the help of others. If the person you work for takes on the majority of risks for the company and you only serve one person or company at a time, you are probably employed. You will also be told which duties to carry out and will have someone in charge.
You won’t be able to choose the hours that you work, what you do or when you do it if you are employed by someone. You will also be paid to work for a set number of hours as instructed by your boss. As an employee, you will be paid for the hours that you put in, including overtime. This also applies if you work on a part-time or casual basis.
Are you self-employed?
If you have a business and are responsible for its failure or success, you are likely to be self-employed. Carrying out work for more than one person at a time is also an indication that you are self-employed, as is being able to decide how and when you work and which tasks you complete. Self-employed individuals have the flexibility to hire someone to carry out specified duties for them, or to help with some work in return for you giving them a wage. You are likely to provide all of your own tools if you are self-employed, whereas an employee will have the equipment provided in most cases.
It is also possible to be employed by someone while also running your own business. For instance, you may work for one business during the week and run your own company at the weekend. A self-employed person has responsibility for completing a self assessment tax return every year and paying their own tax, whereas someone who is employed will have income tax and National Insurance deducted through the PAYE system.
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