Employment status

Whether an individual is employed or self-employed has substantial income tax and National Insurance contributions (NICs) consequences for the individual and also for the employer (if there is one), as the obligation to account to HMRC for income tax and NICs will fall on an employer.

Fundamentally, an employee will be paid an amount after the deduction of income tax and NICs (ie net), whereas a self-employed individual will be paid on a gross basis. As a result, the self-employed will be required to make payments to HMRC directly, with strict deadlines applying to the payments themselves as well as the notification of the income pursuant to the self-assessment regime. The type (and therefore the amount and due date) of NICs will also vary depending on the employment status of the individual. In addition, the provisions regarding the tax deductible status of expenses are more favourable for the self-employed than for employees.

Employment status also determines which statutory rights and protections an individual is entitled to enjoy, and also provides entitlement to certain statutory payments. However, it is important to appreciate that, although HMRC and the

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