New Guidance on Employment Status

Whether you are employed or self-employed makes a critical difference to how you are taxed and the tax liabilities of an employed person can be very different indeed when compared with a self-employed person with similar levels of gross income. The National Insurance liabilities of the employed and self-employed are also calculated differently and entitlement to benefits, such as jobseekers allowance, can also be affected.

It is therefore important for any working person to know whether they are employed or self-employed. Sometimes, however, deciding whether a person is genuinely self-employed or an employee can be difficult and HM Revenue and Customs are unforgiving of those who ‘get it wrong’. However, they do produce factsheets to help people make the correct decision and recently part of the IR56 booklet (‘Employed or Self-Employed’) has been updated.

The new guidance, in the form of leaflet ES/FS1, is a short guide to the question and is helpful in mentioning specific types of occupation (e.g. entertainers) where the normal tax law may not apply.  It also provides links for advice on special circumstances - for example, the working rights of non-residents and what to do if you have more than one job.