When you run a contractor-based business such as a tattoo studio, barbershop, or beauty clinic, it can be tempting to assume that simply calling someone “self-employed” makes it true. In reality, HMRC looks at how the working relationship actually functions, not just the label.

That is why it is so important to understand the difference between being employed and being self-employed.

Employed vs. Self-Employed: Key Differences

Here is a simple comparison of the two models.

Employed

• Fixed schedule set by the employer
• Paid holiday and sick leave
• Tools, space, and equipment provided
• Employer responsible for tax and pension contributions
• Protected by employment laws and rights

Self-Employed

• Sets their own working hours
• No entitlement to paid leave
• Uses their own tools and equipment
• Responsible for their own tax and pension
• Not covered by statutory employment protections

Why This Distinction Matters

Your choice of structure affects much more than titles. It directly impacts:

• VAT liability: whether income counts towards your threshold
• Tax calculations: who is responsible for paying and reporting
• Legal responsibilities: what rights and protections apply
• How you pay your team: invoices, splits, or wages

If you are treating contractors as employees in practice, for example by setting fixed schedules, providing all their tools, and paying them like staff, HMRC may decide they are not truly self-employed. That can bring risks around tax, compliance, and potential backdated obligations.

Get the Free Independent Contractor Checklist

To help you stay compliant, we have created a straightforward Independent Contractor Checklist. It walks you through the key factors HMRC considers so you can check whether your setup genuinely matches self-employment.

👉 Download the free Contractor Checklist here

Clarity around self-employment protects both you and your team. It helps you stay compliant and ensures your business runs in a way that makes financial and legal sense.