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

You can have a full-time job but also work on the side as a freelancer.

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 declare her untaxed income.

While Rebecca is paid her salary through PAYE thanks to her employer, the income she makes on the side is untaxed income and needs to be declared to HMRC so they can let her know how much tax she owes. 

Her next steps:

1. Check to see if you need to register
2. Register as a sole trader with the HMRC
3. Familiarise herself with the dates and deadlines
4. Make sure your tax code is correct
5. Submit a tax return each year of self-employment 

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. Instead of you getting paid directly, your umbrella company pays your salary via PAYE. 

How would it work, you ask?

• You do some work for your client
• Your client pays the umbrella company your fees
• Your umbrella company pays you your employment income
• They also pay your taxes for you to HMRC via PAYE

Check with your umbrella company on how the process works. They should be paying taxes from your salary to HMRC on your behalf, like any other employer would. 

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

Sometimes, it’s not easy to know whether you’re an employee or a subcontractor. However, it usually is stated in the contract when you start working. 

If you’re still unsure, you can figure out if you’re an employee by:

• Asking your employer for your payslip
• Checking your status online with HMRC

Remember, if you’re not an employee that means you’ll have untaxed income you’ll need to declare to HMRC, through a Self Assessment tax return. 

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). Therefore, you wouldn’t be considered self-employed.

You’ll need to:

• Submit a company tax return each year
• Pay tax on company profits first (minus costs, including salaries)
• 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

Need a hand?

Still not sure what your situation is? If you’re trying to get your taxes sorted and need a hand figuring out your next step, don’t hesitate to get in touch! Our friendly support team is happy to help. You can reach them on [email protected] or via the live chat on the homepage.

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