How do I pay tax as a self employed freelancer?

Last updated: 13 Nov 2023

This article explains recent changes that transferred liability for unpaid employment tax to engagers and their impact. 

Freelance employment status and IR35

The IR35 changes to the ‘off-payroll’ tax rules which came into effect in April 2021 have now bedded in, and in Bectu’s view, are here to stay.

These reforms led all companies who use members working through personal service companies (PSCs), as well as self-employed sole traders, to carefully scrutinise whether or not the workers they engage are direct employees, rather than freelancers.

Most importantly, the new rules meant that the liability for any unpaid employment tax now falls on the engager where workers provide services through their own limited ‘PSCs (previously the liability was on the worker when they worked in this way).

The Bectu Sector of Prospect used numerous meetings and briefings across the UK to explain the new regime, and while there was no technical change in how employment status is tested, the reality is that some employers will become more risk-averse and insist on PAYE working whenever they are in any doubt.

In theory, these changes should have had no impact on Self-Employed Sole Traders, but, the caution around people working through PSCs was infectious. Members who had previously been able to invoice for work found themselves with no option but to ‘go on the payroll’ and have taxed deducted at source.

Bectu members should note:

  • companies are “sheep-dipping” their freelance workers (i.e., treating everyone working in a particular job title the same way – regardless of the details of the employment relationship). HMRC are clear that this should not be happening. Members are urged to contact the union for help with this problem if it arises.
  • In the film and TV sector HMRC has re-issued its list of workers in grades which should normally be treated as self-employed, which covers many, but by no means all, BECTU members. Bectu has been consulted on this and the union’s branches have worked with officials to help HMRC improve this list.
  • Because some roles may or may not be consistently defined by ‘self-employment’, some members may find that their role is not on this list. However, they still may consider applying to HMRC for a so-called “Lorimer Letter”, which can then be used to assure engagers that they are self-employed. Workers applying for such a letter will need to demonstrate that they have worked for at least 10 engagers, each for less than 10 days, in the previous year.

Some engagers have wrongly assumed that film and TV workers who are not on the list are automatically employees, which conflicts with HMRC’s own advice. Members have been advised by Bectu that if an engager offers work on a PAYE basis, and refuses to accept self-employed status, there is little that can be done except to attempt a negotiation, and if appropriate, decline the offer of work.

Many companies are using the HMRC online status checker to identify workers who may actually be their employees. However, this test will will not always be the last word on this question, and will often return an ‘unable to determine’ outcome. HMRC’s list of self-employed grades for film and TV is available here. It needs to be read in conjunction with the HMRC Employment Status Manual.


Full tax guide available to Bectu members

Bectu has re-issued its Tax for Freelancers Guide, which can be accessed here with a members’ login, and it now contains detailed information on the steps to take if a worker is wrongly categorised as being an employee. Join us to access this and personalised help on tax, as well as to find out about meetings for members.


New freelance rights to information about engagements

From April 2020 freelance members who qualify as “workers”, but remain self-employed, gained a new right to be given a written “statement of initial employment particulars”, on the first day of any engagement.

Among the details to be included by engagers are normal days and hours of work, information on whether or not the hours can be varied, and any entitlement to paid benefits like holiday pay . Many Bectu members have “worker” rights, one of which is holiday pay, so any who receive this will be entitled to written particulars.

Prior to this change, people who worked in more conventional employment already had this right but they may have had to wait for up to two months to receive them. The new rules mean that everyone should expect to receive the document on day one of employment.