Should I Do My Own Taxes Or Hire An Accountant – Whether you are employed, self-employed, or both, it will not affect the amount of taxes and National Insurance Contributions (NIC) you have to pay, or how you pay. You need to know which ones apply to you so that you can meet your tax obligations and claim the tax benefits available to you.
This page is for you if you need more information about your employment status (i.e., whether you are employed or self-employed) and you are a person who provides or will provide services in your individual capacity.
Should I Do My Own Taxes Or Hire An Accountant
Whether you are employed or self-employed, the amount of tax and NIC you have to pay and how you pay them will matter.
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If you are employed, your employer is required by law to collect payroll tax (PAYE) and class 1 national insurance contributions on your wages and pay them to HMRC on your behalf. If you are self-employed, you pay income tax through the self-assessment tax return system, as well as class 2 and class 4 national insurance contributions directly to HMRC.
If you believe you are employed, you should review the employment pages for more information about your tax position. If you believe you are self-employed, you should review the pages in this self-employment section for more information about your tax position.
It is also important for employment law purposes to know if you are an employee or self-employed. Those who are employed or self-employed under the tax laws will usually be employed or self-employed under the employment laws, but not always. The “working” status should also be considered (as explained in the question below).
Finally, it is important to know if you are employed or self-employed because your tax credit or universal credit status may also follow your employment status for tax purposes. Please see the question below for more information.
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⚠️ Important Note: The distinction between employment and self-employment is not always clear; some businesses try to exploit job seekers by treating them as self-employed when they should be treated like employees. This is known as “false self-employment”.
This means that the business avoids the use of Pay As You Earn (PAYE) and thus does not make any tax or national insurance payments on your wages at HMRevenue & Customs (HMRC). Under certain circumstances, HMRC may require you to pay the PAYE that should have been made by the business if they believe you should have been treated as an employee rather than as an employee, although they must contact the business first.
Instead, make sure you understand your employment or self-employment status before you start working. If you think something is wrong, you can challenge the company offering you the job or contact HMRC.
There is no clear legal definition of what it means to be an employee or self-employed. The courts have considered this issue many times over the years, and they have identified some situations in which you are definitely employed and others where you are definitely self-employed. But there are other situations where the position is not clear.
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If it’s still not clear, then you need to take into account a lot of different factors and then look at the overall picture that emerges (more on that below).
You may be employed even if you work part-time or have flexible working hours, or if you only work on a short-term contract. But if you have a lot of short contracts that you arrange and set up yourself, you are more likely to be self-employed.
None of these tests are definitive. To get the big picture, several different factors need to be weighed – see the table below.
Note that you will not automatically be self-employed just because you have a unique taxpayer reference (UTR) and file your tax returns every year, your position is not permanent, or you provide your own small tools.
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If you are still not clear, you should consider the factors outlined in the table below. In the table, the person you work for is called your “engager” – he can be your employer or your client.
You have to consider all the issues and then look at the big picture that emerges. Does it involve employment or self-employment? You may also find it helpful to review the important section of the case to see how courts might apply the tests in the table in real life.
Please note that the law here is complex – we have tried to keep things simple, but this is not an exhaustive guide. If you are still not clear, you should seek help from a tax advisor or HMRC. We will tell you how to find a professional tax advisor, including through tax charities, in our help section.
HMRC also offers an online tool called Check Employment Status for Tax (CEST). He will ask you a series of questions about your situation and at the end will give you information about your tax status, which you can print out and then show to your employer (if necessary).
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To access the part of the tool that deals with general status inquiries, you need to click “If any work is classified as employment or self-employment for tax purposes” in response to the first question (What do you want to know?)
While HMRC has tried to make the tool as user-friendly as possible, the questions also use rather technical language that can be confusing. For example, one of the questions asks if an employee is an official. The term “officer” has a special meaning in tax law and includes treasurers, trustees, company directors, company secretaries, or other similar statutory positions. You are unlikely to be an official, so this question should be answered “No”.
The HMRC Employment Status Guide has some guidance to help you use it, including a glossary of terms and help in understanding what each question leads to.
Please note that the CEST tool should not be used to determine status for employment law purposes, but only for tax purposes.
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The “gig economy” includes people who make money using one of the many online platforms available, such as offering rides, running errands, and doing deliveries.
We know that given the irregular and often “on-demand” nature of the gig economy’s income, in many cases it doesn’t even occur to many people that their income is taxable, let alone what their obligations to it are. .
Our Taxes if You Work in the Gig Economy page offers guidance specifically for those working in the Gig Economy about their tax and labor law status, including self-assessment registration. It also covers a wide range of other issues that workers may have questions about, including:
The publication of the newsletter was prompted by an HMRC study that found that many people (54 percent) who have earned income from the sharing economy (including those who work in the “gig economy”) do not realize that it is taxed.
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There is a common misconception that people working in the construction industry are always self-employed. This is not the case. People working in the construction industry should file their employment status in the same way as everyone else.
⚠️ Please note that if you work in the construction industry and are treated under the Construction Industry Scheme (CIS), then your employer considers you self-employed. However, this can be difficult to notice, as under the CIS you are given “pay slips” and are subject to withholding tax.
If you are being treated as self-employed but feel it is wrong, you can challenge the company that is offering you a job or contact HMRC.
A partnership (or a firm if you are based in Scotland) is an organization that can be used to conduct business. Partners (which can be either individuals or companies) personally share responsibility for their business. While a partnership may be formally formed using a Partnership Agreement, it may also be carried out informally on the basis of mutual understanding between all partners.
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With the exception of Scotland, a partnership is not a separate legal entity like a limited liability company (see below). Scottish partnerships are a separate legal entity and may own property on their own.
There are additional tax liabilities if you are a partner in a partnership and these are explained in our self-employment guide which covers:
More information on what your position is if you are setting up a limited liability company is provided in the employment section.
The employment section has information about your position if you are working through an agency or an umbrella company.
Do I Need Personal Tax Advice?
You can be an employee and self-employed at the same time. This usually happens if you are doing two jobs. For example, if you work for yourself as a hairdresser during the day, and in the evenings
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