Rights for the Self-Employed
You are self-employed if you run your own business and are responsible for its success or failure. If you are self-employed, your employment rights will differ from employees or workers. You also have a greater number of obligations in terms of tax and protection of yourself and your employees (if you have any).
Before exploring your employment rights, please ensure that you have checked and understood your employment status. You can find out more about the different types of employment status and characteristics of self-employment on our page how to work out your employment status.
What makes me self-employed?
You are likely to be self-employed if you meet the following criteria:
- You are responsible for the success or failure of your own business
- You can hire others to do the work for you
- You choose when and how you do the work
- You invoice clients for work rather than receive a wage
- You provide your own tools and equipment
- You can work for more than one client, agreeing separate contracts with each one
CIPD have produced a detailed guide for self-employed contractors.
It is possible that your status within tax law will differ from your status within employment law. This means you may be classed as an employee for employment law purposes and still be taxed as a self-employed person.
I want to find out my employment status for payroll or tax purposes
If you are trying to determine your employment status for tax purposes, you can use the HMRC Check Employment Status for Tax (CEST) tool.
Data Protection
As a self-employed individual, you have rights under the Data Protection Act 2018. These include a right to request what information businesses, organisations or the government are keeping about you and how that information is being used.
You also have a right to restrict the use of your data and object to the way it is processed in some circumstances. You can read more about your data protection rights on the government's website.
Additionally, the Data Protection Act imposes obligations on how to manage other people’s information which may apply to you, especially if you are a sole trader.
Obligations may include keeping employees’, clients’, and suppliers’ information secure and up to date, and getting people’s consent before you can collect certain data about them.
The Information Commissioner’s Office (ICO) has issued a useful self-assessment tool to help self-employed individuals and sole traders ensure their compliance with the data protection law. The ICO has also published a detailed guide on UK data protection law.
Discrimination
Self-employed people have the right not to be discriminated against by the clients and customers they are doing work for.
Like other workers, self-employed people are protected from discrimination under the Equality Act 2010, and cannot be discriminated against due to their:
- Age
- Marriage or civil partnership
- Pregnancy or maternity
- Disability
- Race (including nationality)
- Religion or faith
- Sex
- Sexual orientation
- Gender reassignment
More detailed guidance on your rights regarding discrimination can be found on the government's website, including information on types of discrimination and what you can do if you believe you are being discriminated against.
Pregnancy — Maternity Allowance
You are not entitled to maternity or adoption leave or pay as a self-employed individual; however, provided you have been self-employed for at least 26 out of the 66 weeks before your due date and earn at least £30 a week, you may claim a Maternity Allowance (MA) for 39 weeks.
More on the Maternity Allowance requirements and how much you may claim is available.
State Pension
Provided you have paid your National Insurance contributions to HMRC, you should be entitled to a State Pension as a self-employed individual.
Note that there is a new State Pension for those reaching State Pension age from 6 April 2016.
To find out more about the new State Pension, including how it works, how much to contribute and how much you might be eligible to receive, visit the government's website, or the government’s guidance on State Pensions for the self-employed.
Welfare Benefits
If you are on a low income, out of work or unable to work, you may be eligible to claim benefits such as Universal Credit. This consists of monthly payments to assist with living costs.
As a self-employed individual, you are not entitled to sick pay. You may be able to claim Employment and Support Allowance (ESA) and/or a higher amount of Universal Credit if you are suffering from a health condition or have a disability that is affecting your work.
To find out more about Universal Credit relating to health conditions and disability, please visit the government's website. Note that Universal Credit is set to replace other benefit schemes such as Housing Benefit, though you may still make claims for some of them under certain circumstances.
ESA provides money towards your living costs and support to return to work if this is possible; you can read more about ESA and how to claim it. You can find information on applying for Universal Credit as a self-employed individual.
Income protection insurance
You can protect yourself against possible losses of earnings by getting income protection insurance. This can cover 50% -65% of your monthly average income if you are unable to work due to illness or injury. You can also get critical illness cover. This specifically covers more serious illnesses including heart attack and certain types of cancer.
If you would like to read more about these and other types of personal insurance you may take out as a self-employed individual, you can find a useful overview at Money Helper.
Whistleblowing protection
Whistleblowing protection means that workers who disclose wrongdoing connected to their work or employer are protected by law from unfair treatment and dismissal.
This protection normally applies to employees, workers and only certain self-employed individuals, such as self-employed doctors, dentists, ophthalmologists and pharmacists in the NHS. For general guidance, visit the government's website pages on whistleblowing.
Tax
Keeping full and accurate records of your income and expenses is a legal requirement. It is necessary to organise, store and regularly update information, especially if you have to send HM Revenue and Customs (HMRC) a Self-Assessment tax return.
Penalties may be imposed for not taking reasonable care with records and tax returns.
Find out more about keeping your pay and tax records.
As a self-employed individual, you pay Income Tax through Self-Assessment. A Self-Assessment tax return needs to be completed online or by filling in a paper form when the tax year ends on the 5th of April.
HMRC must have received your tax return by the 31st of October if you do this by paper, or the 31st of January of the following year if you do this online. If your tax return is late, you will incur a late-filing penalty of £100 if it is returned in the first three months after the deadline. Appeals against penalties can be made if you have a reasonable excuse.
Detailed information on Self-Assessment tax returns.
National Insurance Contributions
Class 2 National Insurance contributions apply to those earning over £6,515 a year. If you earn less than this, you can choose to pay voluntary contributions to fill or avoid gaps in your National Insurance record.
Class 4 National Insurance contributions apply to those earning over £9,569 a year.
Find out more about National Insurance Contributions.
VAT
You must register your business for VAT with HMRC if its VAT taxable turnover is more than £85,000. Once registered for VAT, you need to fill in a form and submit regular VAT returns online and pay any VAT due electronically.
PAYE (Pay as you earn)
If you are self-employed and employ other individuals, you have to pay your employees via the PAYE system. This means that you make tax deductions on behalf of individuals who are on your payroll. You will need to register for PAYE if your employees get paid more than £120 a week, get expenses and benefits, have another job or get a pension.
More information can be found here.
Health and Safety
Even if there are only small risks of harm to your employees or yourself, as a self-employed individual it is your responsibility to protect yourself and your employees against them. Examples of the things you would need to consider in a risk assessment include:
- Equipment, materials or substances that can injure somebody.
- Activity that creates noise, dust or fumes.
More details on health and safety risks and exemptions from this obligation can be found on the Health and Safety Executive website.
Employer’s Liability Insurance
Employer’s liability insurance is mandatory once you become an employer. Your policy must cover you for at least £5 million. This insures you against having to pay compensation to employees who are injured or become unwell working for you. A fine of £2,500 can be imposed for each day that you do not have this insurance.
Only authorised insurers can be used. The Financial Conduct Authority maintains a register of authorised insurers.
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