Can You Be Employed and Self-Employed at the Same Time?
Confused about whether or not you can be employed and self-employed at the same time? LeeP Accountants looks at the legality and logistics of such a working scenario.
LeeP Accountants in Peterborough get asked this question a lot: can I be employed and self-employed?
It is a confusions for many and quite rightly so. Both types of employment come with numerous complexities and tax obligations. Nobody wants to get caught out doing the wrong thing and end up getting caught out unawares.
Fortunately, however, you can not only be employed and self-employed at the same time, but many people downright recommend it.
What Types of Employment/Income Methods Can You Combine?
It may come as a surprise to some, but you can actually combine a multitude of different types of employment and income methods without incurring any legal issues from the taxman. Here are some examples of what you can combine:
- Self/Sole Trader — This means running your own business as a self-employed individual. For example, self-employed freelance journalists, gardeners or electricians. This type of self-employment differs from other forms as you often work for a multitude of clients and have personal liability for the business.
- Contractor — A contractor works in a similar way to a sole trader, but usually works for a single business on a long-term basis. In the middle of employment and self-employment, you manage your own tax and finances but are committed to working for one employer at a time, maybe in a series of shorter term contracts. As a contractor, you may also be aware of a legislation called IR35, the impact of which needs to be assessed for each contract to determine whether you should be paying tax at source.
- Employed — The classic method of working, being employed simply means you have a contract with a business and they manage the financial side of your employment, your tax is deducted at source before it is paid to you.
- Owning a Limited Company — Owning a limited company can be very similar in many respects to being a sole trader, or it can be infinitely larger and more complex. From an employment standpoint, however, the biggest difference is the way you draw earnings, which is paid out through the company and not directly to you.
- Property, Royalty and Capital Gains Income — Landlords, entrepreneurs, artists and those who earn a living from capital gains are not technically considered self-employed, but they are often liable to taxes that most aren’t, but also have a variety of reliefs available to them to help offset some of these taxes.
Legality of Being Employed and Self-Employed at the Same Time
It is possible for a British citizen to be earning income from two, three or even all of the methods mentioned above.
The confusion about whether or not you can be employed and self-employed at the same time simply comes from a lack of knowledge of how our employment and income system works.
HMRC has no interest in inhibiting your ability to work, earn and pay tax. Any form of income you receive, even when combined with other forms of income, is actively encouraged by the government, providing you inform them of the type of income you’ll be receiving.
If you are a traditionally employed worker, for example, you must let HMRC know that you are earning extra money through property rentals or a small business outside of this. It is not enough to be paying some tax; you need to pay exactly what you owe.
Benefits of Being Employed and Self-Employed
As I mentioned earlier in this post, some people recommend being employed and self-employed at the same time, myself included.
The benefits are simple, but valuable. One of the primary reasons is the purpose of taxation. Different employment methods and types of income are taxed in different ways, so by taking advantage of your options, you might save yourself a bit of money.
The other benefit I also have to mention is that it can also be a great source of happiness and mental wellbeing. It is rare that somebody would start a business in an area that they didn’t enjoy working in or have a passion for. Forget the financial side of things; having your own business alongside your current job can provide you with a sense of happiness and accomplishment you won’t find anywhere else. Since starting LeeP, I have worked harder than ever and yet am happier than I can ever recall!