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Employment status key test.

Who is an Employee?

An employee is an individual who works part-time or full-time under a contract of employment, whether oral or written, express or implied, and has recognized rights and duties.
Often people mix this up as they are not sure what category they are on.

I have been often been told by directors of limited Companies that they were self-employed as a result of running a limited company.

However, directors of a Limited Liability Company are the employee of the company because they are responsible for the smooth running of the company

Therefore, the main difference between a self-employed person and an employed person is as follows.


Self-employed individuals in the UK

Usually, when we are self-employed, we run our business ourselves or employ people to work with us. The financial risk is totally yours. You would have to register with revenue as being self-employed and the business would not be run through a limited company.

As a business, you are likely to run into taxing issues that an individual taxpayer may not encounter. Choosing the most legal and profitable taxing structure is of immense importance. In the UK, the penalties for evasion are rising daily. Our accounting firm in the UK knows this and understands the importance of creating a tax structure that is not only beneficial to your business but that is legal, and easy to understand.


Characteristics of an employed individual in the UK.

  • Do you have a contract that states they are employed (it can also be implied)
  • The person will receive salary and benefits as stated in their contracts.
  • Holiday pay is paid by the employers and also stated in their contract.
  • An employee receives sick pay, study leave,
  • You have job security
  • You are accountable to someone.
  • Importantly you pay tax weekly or monthly depending on the contract.
  • You pay Class 1 National Insurance
  • Your employer runs PAYE on your agreed income and pays you the net PAY
  • You are guided by Employment law in the UK

If not sure of your employment status.

  • Do you have a mutual obligation with your employer?
  • Are you well integrated into the team?
  • Does your employer control the way your work is done?
  • Do they provide equipment such as a computer, or printers?
  • Can you be substituted at work?
  • Do you have a financial risk for working in the establishment?
  • Do you have different paymasters?

Conclusion on employment status.

The knowledge of employee status is very important.

The reason for this is that employed and self-employed individuals pay different types of tax and national insurance.

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