What's the difference between employment and self-employment?

There are two ways that you can be paid for your time.

One is by being employed, and the other is being self-employed.

In both cases you can earn money below a "personal allowance" which is not taxed.


If you are employed, this means your employer takes off taxes before they pay you. They will have some responsibilities to you, for instance if you are sick or to get time off as a parent when you have a new baby. You will have a contract which says what hours you work (though this can still be flexible).

Your employer will deduct two sorts of tax - PAYE (which is a tax on what you earn - it stands for "pay as you earn") and NI (which is another tax called National Insurance - in practice they go to the same place). It means you will receive less than you have earned. They will also pay their own employer's National Insurance on employing you.

If you are employed, you will get a pay slip that tells you what you've earned and the tax taken off. Each May you'll get a form called a P60 that tells you what you earned for the previous tax year. You may get another one called a P11D that shows benefits. And if you leave a job you'll get a P45.

If you are just employed and not a very high earner, then you don't need to do a tax return - it's all sorted by your employer.

BUT if you are also self-employed you do need to tell the tax authority what you earned as an employee so they can take it into account. 


If you are self-employed then you are an independent supplier. You can agree what hours and when you work, and in theory have more freedom. But you need to take more responsibility for instance if you get sick, and to make sure you're insured.

You get paid what you earn, and are responsible for making sure the right amount goes to the tax authority.  You need to report this on a tax return, and then pay tax to the authority.

If you work for Deliveroo or Uber, or sell things online or as a freelancer, then this will be self-employed. It's a guide but not a rule - some platforms employ people. If in doubt, ask!

(Some people also choose to set up their own company to do these things and then employ themselves - which involves more complex issues.)

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