Worker Tax Status

30th June 2014

Employer or Self-Employed? – that is the question
As an employer, legislation makes it your responsibility to correctly determine the employment status of your workers – that is, whether they’re employed by you or self-employed. This depends on the terms and conditions of your working relationship with each worker. It’s important to get your workers’ employment status right because it affects the way tax and National Insurance contributions (NICs) are calculated for them. And it determines whether or not you have to operate PAYE (Pay As You Earn) on their earnings.

As a general rule, a worker is:
Employed if they work for you and don’t have the risks of running a business
Self-employed if they’re in business on their own account and are responsible for the success or failure of their business
The term ’employment status’ refers to whether a worker is employed or self-employed. This affects the tax and NICs that are due on their earnings. So if you don’t get it right, you could end up having to pay extra tax, NICs, interest and possible penalties later.

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