Originally posted on: 2 September 2024
Updated on: 9 February 2026
Often, a common way of starting contracting is by doing a bit of work on the side, where you have your full-time employment but are also dipping your toe into self-employment.
Maybe you’re doing some evening work in an unrelated industry, or maybe it’s related to a hobby or interest. You might even be doing work for friends and family at a discounted rate while you get yourself set up. With regular income from full time employment, this can be a low-stress way to start working for yourself. It’s a good way of testing the waters and becoming familiar with things like invoicing, claiming expenses, and running a basic profit and loss. It also helps you learn to navigate client expectations, making sure you are delivering on what you promised.
So, in this week’s blog article, I’ve decided to look at the impact of working both as an employee and for yourself. For those wanting to transition from full-time employment to self-employment, this can sometimes be an ideal way to do it.
Key Takeaways
- Understanding your employment status as employee, or self-employed is essential for managing dual employment and ensuring compliance with tax obligations.
- Effective management of dual employment requires planning, including reviewing contracts for restrictions, setting routines, and managing time to prevent falling behind in your day job while you try to build a side business in the evenings and weekends.
- Self-employment brings tax obligations, including the need to file a self-assessment tax return, declare all income, and understand National Insurance contributions and associated rates. This will all be new to you if you have always worked in full time work.
Understanding Employment Status
Understanding your employment status is key to managing dual employment effectively. Your actual work situation determines your employment status, not merely the labels in your contract, or what you think you might be. There are three primary classifications: employee, worker, and self-employed. Each status comes with different responsibilities and benefits.
As an employee, you likely receive a payslip and have access to a pension plan. You will usually have a contract of employment, and your employer will make all the necessary tax deductions from your payslip. This classification is the most common form of employment status in the UK. It generally means that there is no requirement for you to file a personal tax return every year because your employer will be deducting the correct amount of taxes anyway.
Workers are a broader category of people who work for someone else but don’t meet the criteria of an employee. They may have more autonomy and flexibility in how they do their job but don’t have the same level of control as the self employed. Workers can work for multiple clients or employers and are entitled to certain basic rights including the National Minimum Wage, paid holidays and protection from discrimination. But they may not have the same access to sick pay and redundancy pay as employees. Examples of workers include agency workers, casual workers and freelancers working under a contract for services.
As a self employed person you are your own boss, running your business and being responsible for your work and finances. You have complete control over what you do, how you do it and when you do it. This means you can work for multiple clients at once. But being self employed means you don’t get employee benefits like paid holiday or sick pay. You are also responsible for managing your own taxes and National Insurance through the self assessment system. The self employed take on the financial risks and rewards of their business and are personally liable for their actions and any business debts.
Combining Self-Employment with Traditional Employment
Yes, it’s entirely possible to be both employed and self-employed at the same time. Many individuals work for a company while also running their own business, leveraging the benefits of both roles. This combination can include having a full-time job while freelancing or managing a side business.
The flexibility of a zero-hour Worker contract can be particularly advantageous, allowing individuals to take on additional self-employed work as needed. However, it is essential to register as self-employed and declare all untaxed income to comply with regulatory requirements.
Let’s take a look into how to manage these responsibilities effectively.
Managing Multiple Jobs
Balancing multiple jobs requires planning and prioritization. Establishing a consistent daily routine can help manage time effectively between employment and self-employment tasks. Goal setting and productivity tools can significantly enhance effectiveness in handling tasks from both roles.
Scheduling regular breaks and setting aside personal time helps prevent burnout and promotes overall well-being. Effectively managing your responsibilities and maintaining a healthy work-life balance ensures you can handle the demands of dual employment. If you are young, you probably feel like the sky is the limit in terms of your enthusiasm and drive. However, if you are a little more established, in an older age bracket, then a bit of planning and optimisation will go a long way.
Checking Employment Contracts
Reviewing your employment contract before starting dual employment is vital. Look for any restrictions or conflicts of interest related to additional work, and check for exclusivity clauses that may prevent outside work.
Understanding these terms helps avoid potential legal issues and ensures compliance with employment law for employment law purposes. Proactive measures can prevent future complications, enabling you to pursue both employment and self-employment seamlessly.
Ensure that you don’t overlook this step, as you may be surprised by how restrictive your employment contract is with regards to doing work in the evenings and weekends, especially if it is in the same or a similar industry in which you are currently employed.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Tax Obligations and Self Assessment
Tax obligations are a critical aspect of dual employment. Self-employed individuals must file a self-assessment tax return including all forms of taxable income, declaring income from both self-employment and employment to comply with HM Revenue & Customs (HMRC) requirements.
Detailed records of your income from both sources are essential for accurate tax assessment. Proper documentation and understanding your tax obligations help avoid penalties and ensure smooth financial management. It is important to pay income tax to comply with regulations.
In the UK you can earn up to £1,000 from self employed trading without registering as a sole trader with HMRC. This is because of the trading allowance, so you wouldn’t need to pay tax on this income or submit a Self Assessment tax return. But if your gross trading income is over £1,000 you must register even if your profit is less.
National Insurance Contributions
National Insurance contributions differ between employed and self-employed individuals. Typically, employed individuals pay Class 1 contributions through PAYE which is taken care of by their employer.
For the self-employed in the 2024/25 tax year, the Class 4 NIC rate for individuals on profits between the Lower and Upper Profits Limits is set at 6%. Although the direct link between contributions and benefits has weakened over time, understanding these rates and their implications is crucial for financial planning.
Since Class 2 NIC’s have largely been scrapped, if you earn below £6,725 as a sole trader you can now choose to pay voluntary Class 2 at £3.45 a week for 2024/25. This helps keep your pension record intact (so that the year of earnings counts toward your state pension). However, if you are mainly employed and your sole trader earnings are below £6,725, your full-time employment already maintains your pension record, making voluntary Class 2 contributions unnecessary.
Self-employed individuals generally have lower National Insurance contribution rates compared to employees, resulting in a reduced overall tax burden for self employed people. However, it’s important to stay informed about these contributions to manage your finances effectively.
Declaring Income
When completing your self-assessment as a sole trader, include all income, both from employment and self-employment, as well as your own income tax. This comprehensive declaration ensures compliance with tax laws and avoids potential penalties from HM Revenue & Customs.
Employment income tax is paid through PAYE, while self-employment profits are managed by self-assessment. So what you will find when you complete your personal tax return, where you have full-time work and some self-employment work, the full-time work tax calculation will generally be correct and no additional tax will be payable on that. However, there will be tax and National Insurance that is due on your self-employed income, depending on the level of sole trader earnings that you’ve had.
Benefits and Drawbacks of Dual Employment
Managing both self-employment and a traditional job can enhance financial stability. Engaging in dual employment allows individuals to acquire a wider range of skills, potentially making them more marketable. This diversity in roles can also provide additional financial security.
However, juggling responsibilities from both self-employment and a traditional job can lead to a heavier workload, impacting work-life balance. Individuals involved in dual employment might experience a higher risk of burnout due to the demands of managing multiple roles. Effective time management and setting clear boundaries are essential to avoid burnout and maintain productivity.
Weighing the benefits and drawbacks allows you to make an informed decision about pursuing dual employment and finding effective strategies to manage both roles.
In the end, you may realise that the short-term pain of taking on evening or weekend work is worth it in the long run, especially where you can convert that into becoming a full-time role for you.
Legal Considerations and Employment Rights
Legal considerations are a critical aspect of dual employment. Employers may incorrectly label their workers as self-employed to reduce their obligations and deny rights. If you suspect wrongful employment classification, you can file a grievance or take your case to an employment tribunal. This can be especially prevalent in low paid industries, or where employers take on vulnerable workers.
Self-employed individuals may not be guaranteed holiday or sick pay, as these benefits often depend on the type of contract and employment status. However, employees and workers are entitled to a minimum of 5.6 weeks of holiday pay, which equates to at least 28 days for those working five days a week. Consulting with an adviser can help clarify your employment rights based on your status.
Being aware of these legal considerations helps you understand your rights and take appropriate action if necessary.
Working Through an Umbrella Company
An umbrella company serves as an employer for freelancers. It provides support and services for those working independently. The umbrella company pays taxes to HMRC on your behalf, ensuring compliance with regulations. This arrangement allows self-employed individuals to receive holiday pay sourced from contractor payments, while the administrative burden is significantly lower for contractors.
Working through an umbrella company can simplify the tax process and provide additional benefits, making it an attractive option for many self-employed contractors.
Running a Limited Company While Employed
Running a limited company while being employed is another viable option. A limited company is recognized as a separate legal entity, distinct from its owners. This structure protects personal assets from business liabilities and ensures that owners are not financially responsible for company losses.
Owners of limited companies have the same rights as any employee, including holiday pay. This setup offers both security and flexibility, allowing you to manage your business alongside your employed role.
One of the benefits here is you can earn income for your limited company and retain that within the business bank account. This way the company will pay corporation tax on that income, but you will not face any personal tax charges until you actually extract those funds from the business. This can be a useful way of building up your business bank account balance while you continue to work as a full time employee at.
Summary
In summary, navigating dual employment involves understanding your employment status, managing tax obligations, and being aware of legal considerations. The benefits of financial stability and skill enhancement must be balanced against the potential for increased workload and burnout.
By staying informed and proactive, you can successfully manage dual employment and enjoy the advantages it offers. Consider your circumstances, seek advice when needed, and take control of your career path.
“…the service has been fabulous.”
Ah Mike, we think you’re pretty fabulous too!
Frequently Asked Questions
Can I be both self-employed and employed at the same time?
Absolutely, you can be both employed and self-employed at the same time. It’s a great way to boost your income, follow your passions, and gain experience. Just remember to manage your time wisely, understand your tax obligations, and check your employment contract for any restrictions.
How do I manage taxes if I have dual employment?
When juggling both a full-time job and self-employment, you’ll be paying tax through PAYE on your employed wages and through self-assessment on your self-employed profits. It’s important to keep accurate records of your self-employed income and expenses, as you’ll need to report these to HMRC annually.
What are the benefits of dual employment?
Combining full-time work with some self-employed work provides a best-of-both-worlds scenario. You enjoy the stability and benefits of a regular job alongside the freedom and flexibility of being your own boss. It’s a great way to boost your income, explore a passion, develop new skills, and diversify your experience.