The following Employment Tax guidance note Produced by Tolley and written by Anne Redston. Anne is a barrister at Temple Tax Chambers and is not authorised to write on behalf of the Tribunals Service or the judiciary. provides comprehensive and up to date tax information covering:
This note sets out the main differences between employment and self-employment. It discusses the timing of payment, national insurance contributions (NIC), expenses, statutory payments, leave entitlements and (briefly) employment rights. It does not cover those who work through agencies (for which, see the Agency workers guidance note).
From the individual’s perspective, employment status matters because it determines the tax and NIC on his earnings, as well as his statutory rights. From the engager’s perspective, miscategorisation may trigger PAYE and NIC assessments, as well as claims for employment rights and / or statutory payments. Getting employment status wrong can be very expensive.
Remember that this note and the other notes on employment status are only a summary, and do not cover all situations. You may need to take further advice. For the position of those working through personal service companies and the IR35 rules, see the Personal service companies ― overview guidance note.
In July 2017, the Taylor Review recommended several significant changes to the current legal position. In February 2018, as part of its response to the Taylor Review, the Government published a consultation document on options for reforming and improving the employment status tests for both employment rights and tax purposes. In December 2018, this was followed by the ‘Good Work Plan’. The main points of the Taylor Review, the 2018 Consultation and the Good Work Plan, which are relevant to this guidance note, are summarised at the end of this note.
The first difference between employment and self-employment is that employees have income tax and NIC deducted from their general earnings before receipt, under PAYE, whereas the self-employed are paid gross.
The self-employed pay their tax and Class 4 NIC on 31 January following the end of the tax year and make a payment on account of next year’s earnings at the same time, with a further payment on 31 July following the end of the tax year. This pattern of payment is
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