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Can I be both employed and self-employed?

Being both full-time employed and self-employed is actually quite common, so the short answer is yes.

Let’s look at some situations.

A. Being full-time employed and self-employed on the side

For example: Rebecca works as a full-time developer for TaxScouts but she also writes software for her own clients via PeoplePerHour — she needs to register as self-employed and pay tax on this income.

What you need to do:

  1. check if you need to register
  2. register as a sole trader with the HMRC
  3. make sure your tax code is correct
  4. submit a personal tax return each year for your self-employment income.

How much tax will you pay?

Tax Who pays
Income tax for salary Your employer
Income tax for self-employment profits (minus claimable expenses) You
Class 1 National Insurance contributions Your employer
Class 2 and 4 National Insurance contributions You

B. Working through an umbrella company

An umbrella company is a business that acts as an employer to freelancers:

  • Your client pays it for your work
  • The umbrella company pays you a salary and takes care of taxes via PAYE.

What you need to do:

  • check with your umbrella company — they should pay taxes for you.

C. Not being sure if you’re an employee or subcontractor

What you need to do to figure out if you’re an employee:

D. Doing business through your own limited company

In this case you’re actually both an owner (“shareholder”) and employee of your own company (“director”), but not self-employed.

What you need to do:

  • submit a company tax return each year
  • the company will pay tax on its profits first (minus costs, including salaries)
  • either pay yourself a salary (and pay taxes through PAYE) or an annual dividend (and pay dividend tax), or both
  • submit a personal tax return as well if your dividends are over £10,000.

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