Employee vs self employed

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Use our reliable tax calculator to estimate your NIC liabilities, income tax, and take-home income as a freelancer versus an employee.
Employee take home
Salary £0.00
Income Tax £0.00
Employee NI £0.00
Net Liability £0.00
Take-home £0.00
Sole trader take home
Profit £0.00
Income Tax £0.00
Employee NI £0.00
Net Liability £0.00
Take-home £0.00

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Enter your annual income. Exclude expenses and VAT.

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Specify tax year.

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For easy comparison, the calculator automatically generates your estimated take-home income for both options simultaneously.

The calculation is based on the assumption that you are entitled to claim a personal allowance and earn a tax-efficient salary.

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Employee vs. . self-employed calculator

Who is an employee?

A private company or the government hires an employee to complete a specific duty in exchange for monetary compensation. The offer letter or the employment contract is issued following the employee selection procedure.

Who is Self-employed?

If you own and operate your firm, you're self-employed. Self-employed workers are not covered by PAYE and do not have the same rights and responsibilities as employees.

This category comprises both self-employed freelancers and sole traders. They can also form a limited business, so it's not an exclusive club.

The most important aspect is that a self-employed individual chooses what task to undertake and when and how to do it. It might be anything from selling handmade toys to a single retailer to providing financial advice to dozens of people.

Anyone who works for himself is responsible for any profits or losses. Unlike limited companies, their liability is also unrestricted. If things go wrong and debts accumulate, it might be problematic for self-employed persons who lack sufficient finances.

How to calculate self-employed tax?

You must enter specific information before the employee calculator can compute your tax and NI.

If you are employed, enter your annual gross pay and tax year. The calculator will calculate your yearly take-home pay, income tax, and NI liabilities. The employee nic calculator assumes you have a regular tax code and are not using your allowance elsewhere.

If you are self-employed, enter your annual profit before taxes. The calculator will also determine your annual take-home pay, income tax, and NI liabilities.
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If you're employed or self-employed, use this calculator to calculate and compare your take-home pay.

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Enter your annual income or annual salary.

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The breakdown of income tax and NI contributions can be seen here. The calculation assumes you qualify for a personal allowance.

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You don't have other sources of income.

Employed and self-employed Tax calculator

The Pay As You Earn (PAYE) system allows your employer to calculate and deduct both income tax and NI contributions from your paycheck.

However, you must prepare and submit your self-assessment tax return if you are self-employed.

You should file a Self-Assessment tax return and submit income tax and National Insurance if you work and have a side business with over £1,000 per year income.

Why is knowing whether I am employed or self-employed important?

The amount of tax and NIC you must pay and how you pay it depends on whether you are employed or self-employed.

If you're an employee, the law requires your employer to compute and submit PAYE tax and Class 1 National Insurance contributions to HMRC on your behalf. If you are self-employed, you must file a Self Assessment tax return and pay Class 2 and Class 4 National Insurance contributions to HMRC directly.

PAYE and NI breakdown for employee

Every month, your employer deducts all these costs from your income.

National Insurance Contributions
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You pay no National Insurance contributions on the first £9,880.

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You pay 12% of your profits between £9,881 and £50,270.

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You pay 2% more if you earn more than £50,270.

It isn't all, though. Your company also makes employer NI contributions of 13.8%, but they are not deducted from your pay.

Income tax breakdown for self-employed individuals

Individuals who are employed and self-employed pay the same income tax rates.

NI breakdown for self-employed individuals
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You pay no class 4 NI contributions on the first £9,880.

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You pay 10.25% of your salary between £9,881 and £50,270.

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You pay 3.25% more if you earn more than £50,270.

In addition, in the tax year 2022/23, if your profits exceed £6,725 (2021/22: £6,515), you must pay an annual Class 2 NI of £163.8 (2021/22: £158.6).

What are Self-Employed business expenses?

One of the most crucial components of self-employment is keeping track of your spending during the tax year, but keeping records of everything can be challenging.

You might simplify the work by adding receipts and bills and deducting them from your turnover. It might assist you in determining how much tax you will owe on your taxable profit. To keep things as simple as possible, self-employed people should keep copies of all invoices, receipts, and bills.

Is it possible for an individual to be employed and self-employed simultaneously?

You can work for someone else while also being self-employed. For example, you are both self-employed and employed if you work as a private professor during the day and have a side hustle of selling goods on eBay and Amazon.

It is, nevertheless, possible to work and run a business at the same time. For example, you may work for someone else during the day and run a business in the evenings and on weekends.

You pay PAYE tax on your job income, and self-employment profits are taxed under the Self Assessment system.

If you are required to file a Self Assessment tax return for your self-employment income, you should also file a Self Assessment tax return for your job income and any other income.

Benefits of being self-employed
Creative freedom

You'll have more control over your decisions if you work for yourself. You'll have the freedom to try out various creative solutions to challenges as they emerge and the satisfaction of seeing your ideas turn into realities.

Independence

You'll be able to establish your hours and arrange your work around other responsibilities, giving you more creative flexibility and a better quality of life.

Benefits of being employed
Monthly compensation

As an employee, you expect to get paid on the same day and for the same amount every month. Employers will deduct your tax, NI, and any pension payments at the source. They enable you to enjoy the fruits of your work without worrying about tax payments or other unexpected costs.

Performance improvement

Most businesses recognise the importance of looking after their employees. After all, happy employees equal a happy workplace. If you decide to work as an employee, make sure you grasp the scope of professional growth opportunities. Most employers will pay for courses and professional training related to your employment, allowing you to continue improving your skills while working.

Although working for yourself gives you more control over your schedule, there may be instances when your income is irregular, causing concern. The flexibility and privilege of not working under anyone don't appeal to a salaried person. So make your decision based on your circumstances.

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