When you are planning to work abroad, choosing the right type of employment can turn out to be a difficult decision. Is it better to work as an employee, or perhaps set up a sole trader business in the United Kingdom? What are the pros and cons of these options?
Summary & key takeaways
- Self-employment gives independence: you choose your clients, hours and workplace.
- The self-employed have no employee rights such as paid holiday or sick pay.
- Employment gives stability and at least 28 days of paid holiday full time.
- As an employee, your employer deducts tax and contributions for you.
- You can be self-employed and employed at once, e.g. when starting a business.
If you are wondering how to organise your professional life in the United Kingdom, read on.
Forms of employment in the UK - what to choose?
An employment contract and self-employment are the two most popular forms of providing work in the United Kingdom. The differences between these forms of organising work lie in the privileges and obligations that rest on you or on the employer, and in how they are taxed. Self-employment in the UK requires looking after your cash flow, a high level of organisation and basic knowledge of the local tax system. Working as an employee in England promises financial stability, but you have to adapt to the requirements imposed by the employer.
Self-employment in the UK - pros and cons
Being self-employed in the UK allows for greater independence. By choosing self-employment, you can count on deciding for yourself which clients you work with, and what your working hours and place of work are. This kind of freedom is a huge benefit for those who value individuality and flexibility in everyday life. A well-run self-employed business will let you grow your venture according to your own vision. You can also count on simpler and higher earnings.
The downside of this option is that you will not gain employee status in the UK, which means you are not entitled to employment rights such as paid holiday or sick leave - just like in Poland. As a self-employed person you also have to deal on your own with the formalities and bureaucracy around the contributions and payments you must make yourself. The regularity of your income, which translates directly into your financial security, also depends solely on your own efforts. It is also worth remembering that self-employment in the United Kingdom requires physical presence and carrying out the work within the United Kingdom, whereas when working as an employee nothing stops you from working remotely from anywhere in the world.
Working as an employee in the United Kingdom - for and against
An employment contract means, above all, job stability. As an employee in the UK you are protected first and foremost by local employment law. You are entitled to paid holiday of at least 28 days a year if you work full time, among other things. You can also count on paid sick leave and maternity leave. You will also be pleased to know that the responsibility for paying your Income Tax and pension contributions rests with your employer - you don’t have to worry about the formalities, which unfortunately have increased since Brexit.
The downside of employment under a contract will certainly be the restrictions that come with working a set job. These include fixed working hours, the need to adapt to your superiors’ expectations and fewer opportunities to grow your income over time.
When does your activity count as self-employment in the UK?
It is worth knowing that self-employment in the UK begins the moment you start working for yourself, even if you have not yet notified the relevant authority (HMRC - HM Revenue and Customs, the British tax office). Your activity will be considered self-employment under employment law in the United Kingdom when:
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you have several clients at the same time,
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you run a sole trader business,
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you manage your own working time and decide how the work is carried out,
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you provide your own equipment needed to do the work and run the business,
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you regularly sell products or services for profit at prices you set yourself.
While self-employed, you can still work in employment. This solution is most often used by people in the early stages of growing their own business.
Self-employed and employed work - tax differences
As we mentioned earlier, employees in the United Kingdom do not have to worry about paying their taxes. That is the employer’s job.
A self-employed person, however, must remember to settle up with the British tax office and file a tax return by the set deadlines. Bear in mind that a range of costs incurred in running the business can be deducted from tax. When filing, it is worth using the help of a professional, particularly if you are not familiar with local tax law. This way you will avoid problems with your business’s tax return and penalties for incorrect records.
Now you know the differences between employment and self-employment in the United Kingdom. Use this knowledge and choose the way of organising your work that suits your individual needs and capabilities. If regularity and security matter to you - choose an employment contract. If, however, you prefer flexibility and have an interesting business idea - go for self-employment.
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