Being Self-Employed But Working For An Employer: Explained

It’s legal to have two jobs at the same time – however, check the terms of your contract with the employer to make sure you’re not in breach. Also, there are scenarios where you could be self-employed but work solely for one employer, if compliant with the government’s off-payroll or IR35 rules.

Self-employed but working for an employer: How it happens

Being self-employed but working for an employer can cause some confusion, so we’re here to clear things up.

There are a couple of reasons why you might be thinking, can I be self-employed and employed simultaneously?

You could be self-employed, but end up working full-time hours for one company, without receiving income via PAYE as its employees do.

Alternatively, you could be a full-time employee at a company and receive a PAYE salary, but also have a side business earning enough money for you to file a self assessment tax return.

Based on ONS employment data, from April to June 2023, 4.31 million people (13%) were self-employed and 28.46 million (87%) were employees, reports the UK Parliament.

In this guide we’ll explore the different employment opportunities presented by these two statuses. Also, we explain whether it’s legal to be both at the same time.

Employed vs self employed

First of all, what do the two terms mean? If you are employed, you tend to:

• Work for someone else and receive a wage or salary
• Let the employer pay your National Insurance (NI) and income tax through PAYE
• Receive sick pay, holiday pay and other benefits
• Have a contract of employment

You can also ask for paid time off in lieu after working overtime at some companies.

And when self-employed, you:

• Work for yourself, are responsible for setting your own hours and managing your own business
• Are responsible for paying your own NI and income tax
• Do not receive sick pay or holiday pay
• Do not have a contract of employment (supplier agreements, for example, do not count)

However, is it legal to be both employed and self-employed? And can you be self-employed but working for an employer on full-time hours?

Can you be self employed and employed?

It’s legal to have two jobs at the same time. For example, you could be an employee at a restaurant in the evenings and a self-employed language tutor during the day.

So, can you be employed and self employed simultaneously? Yes, you can.

However, always check the contract with your employer first, in case it has any stipulations about taking on extra work while you are their employee.

Later in this guide, we’ll explain how to pay your fair share of income tax when you are employed and self-employed at the same time.

Benefits of being both employed and self-employed

Why would you do this though – and is it right for you? Advantages include:

• Making extra money
• Having a plan B in case your employer makes redundancies
• Taking what you learn in your employed job and using it in your self-employed work (and vice versa) to progress faster
• Monetising your hobbies and interests
• Starting your own business without worrying about making a profit from the outset
• Learning how extra skills such as how business expenses and tax work, which would look great on an accounting CV if you change careers, for example

The main downside is the risk of burnout. It can be very tiring to have two jobs at once and the risk is that your performance will suffer in one, or both, lines of work if you’re fatigued.

Working for someone on a self-employed basis

Alternatively, there are several reasons why you might work for one employer all the time, but you’re self-employed.

For example, let’s say you as a freelancer you have a close working relationship with a single client. Either:

• You’re involved with a large project requiring months or years to finish
• The company makes heavy use of your services, so you don’t have the time nor the need to find any other clients

However, be careful. HMRC is wary of companies using self-employed contractors as if they were full-time employees, to avoid paying pensions or NI. They are disguised employees according to HMRC. 

The government has guidance on off-payroll working or IR35 rules, to ensure this doesn’t happen. There is a ‘check employment status for tax (CEST) tool’ to determine if you are technically employed or self-employed for the work, or whether IR35 rules apply.

For example, if the employer can define your working hours, HMRC may view you as employed rather than working for yourself. Here is a flowchart explaining the different rules for contractors.

Being self-employed: How to pay tax to HMRC

Whether you are a freelancer with one client, or a full-time employee with an extra side hustle, you’ll likely need to complete a self assessment tax return.

Remember, the deadline to pay any outstanding tax you owe is the end of January (for the previous tax year). Otherwise there’s a penalty fee!

Below a certain income threshold, there is a tax-free personal allowance. At the time of writing, it’s £12,570. After that, you pay 20% on taxable income up to £50,270 and 40% between that and £125,140 – beyond, it’s 45%.

Crucially, if you are both employed and self-employed, both forms of income should feature on your self assessment tax return. However, you won’t pay the same tax twice.

So, can I be employed and self employed at the same time?

We hope that helps – in short, yes, you can be self-employed but working for an employer too.

If you have any questions about the world of work, there’s a good chance the answer is on our blog. Recently we have written a conflict resolution model guide on how to use one at work, plus what managing upwards means, for example.

And if you want to be employed at a new company but need help writing a new CV, look no further.

That’s what the PurpleCV team are experts at, so please contact us for support or if you have any queries.