Starting work 2. Special rules for different types of earner/worker

Starting work, what kind of worker are you? What are the special rules for certain types of worker?

This is a freeview guide.

In this second part of our starting work guides, we explain the different rules that apply to different workers.

What kind of worker are you?

When you do work for someone you will either be working as:

• Self-employed, see Starting Work 1: Self-Employed
• An employee.
• Sometimes, the tax rules deem you to be an employee, even though you might have thought you were self-employed.

When the tax rules treat you as an employee you may not always receive full employment rights and benefits such as sick pay, holiday pay, employer pensions etc.

• You should confirm your employment status when you start new work.
• Employment status is worked out according to your relationship with your engager, the nature of your work, how you do your work, and many other factors which have been set by the courts over many years.
• If you are told that you are self-employed you may wish to use HMRC’s Check Employment Status Tool as a starting point to check your employment status if you are unsure.

Basics: Employee or not?

If you:

Work directly for an employment agency or staff bureau and it supplies your services to its customer:

• In most cases, you will be taxed as an employee of the agency
• The agency must assess your employment status and decide whether you are subject to the control, direction and supervision of anyone.
• The agency will in most cases have to tax you as an employee and you have employment rights. These are under the terms of the Agency Workers Regulations 2010.
• You can claim tax relief on any employment expenses either via the agency or in writing to HMRC.
• See Agency Workers: At a glance.
• If you are offered an agency contract which treats you as self-employed or the contract appears to give you more tax relief than you expect on your take home pay you may be exposed to an illegal tax avoidance scheme.
• See Starting Work 5: Working for an agency/umbrella tax-avoidance risk

Work directly for an online platform

• You may be self-employed or employed. It may be difficult to determine employment status in some situations which give a new style of working.
• If it is unclear what you are, try and assess your employment status using HMRC's CEST and discuss the findings with your engager. Your engager is responsible for deducting tax and NICs if you are an employee.
• If you are an employee you should receive full employment rights. 

Work directly for a non-business customer

• You should confirm your employment status with your customer.
• Use HMRC’s Check Employment Status Tool as a starting point to check your employment status if you are unsure.
• If you think you should be self-employed but are really unsure do seek professional assistance from an accountant who can help you decide.
• If your customer treats you as an employee you will have full employment rights.

Work through your own company

• If you have set up a company and provide your personal service via the company to an agency or another business customer, you fall within the ‘Off-Payroll Working rules’.
• Off-Payroll Working is the government’s term to describe the situation where someone who it considers is really an employee works on a freelance basis via an intermediary company.
• When the rules cut in, you are deemed to be an employee of the party who is paying you and you acquire no employment rights.
• See Off-Payroll Working: At a glance.

Working through an umbrella company

• Sometimes if you are working for an agency you will be told that you have to work via a 'payroll umbrella' or some other kind of set up where you are being paid by a third party or someone other than the agency that recruited you.
• A payroll umbrella will normally treat you as an employee and deduct PAYE and National Insurance from any wages paid to you. 
• Other entities may pay you in different ways. If you are told that you are being paid via a loan or some kind of revolving credit without deduction of tax or that your pay is adjusted for your expenses but you have no idea what they are talking about, then do not trust that setup. Be extra careful if the paying agency claims to be based outside England, Northern Ireland, Scotland or Wales. 
• You may not always have full employment rights if you are being paid by a third party: it depends on the setup.
• See Starting Work 5: Working for an agency/umbrella tax-avoidance risk

You work for yourself and sell via an online platform

• If you selling your items or services via an online platform you are likely to be self employed.
  • See Starting Work 1: Self-Employed
  • See How to work out your tax if you are self-employed

Next

How to work out your tax if you are an employee
When you are an employee your employer, or the person paying you, must deduct Pay as You Earn (PAYE) income tax and National Insurance Contributions (NICs) from your wages before they pay you.

How to work out your tax if you are self-employed
When you are self-employed you have to account for and pay your own tax and National Insurance Contributions (NICS) to HM Revenue & Customs.

How to register for tax
You are self-employed, you have started working for yourself, what do you need to do to now? How to register for tax.

Previously

Starting work: Self-employed or employed: what's the difference?