Check Employment Status for Tax (CEST)

Understand whether you're considered employed or self-employed for tax purposes in the UK – especially important for contractors, freelancers, and businesses engaging workers.

Why Checking Employment Status Matters

Determining the correct employment status is vital because it affects:

• Who is responsible for paying Income Tax and National Insurance Contributions (NICs)

• Whether IR35 (off-payroll working rules) apply

• Eligibility for statutory rights like sick pay, holiday pay, and pension contributions

• Risk of HMRC investigation and penalties

Whether you're a sole trader, limited company contractor, client, or agency, knowing the correct status helps ensure compliance and financial protection.

Who Should Check Employment Status

You should check employment status if you are:

• A contractor or freelancer providing services via your own business or intermediary

• A client or end-hirer engaging workers, especially in the public sector or large private organisations

• A recruitment agency or umbrella company responsible for managing temporary workers

Status checks are especially important before starting new contracts or engagements, and when reviewing working arrangements.

What’s New in the 2025 Update to CEST

The latest version of the Check Employment Status for Tax (CEST) tool, updated in April 2025, includes:

• A new contract check screen at the beginning – if there's no contract, the tool will exit early

• Clearer and simplified questions for better user experience

• Improved logic to reduce “unable to determine” results

• Reinforcement that HMRC will stand by results if accurate and used in good faith

These updates aim to provide clarity and increase reliability of determinations.

What the CEST Tool Asks You About

To determine employment status, the tool explores several key areas:

Status Factor	What It Means
Mutuality of Obligation	Does the client have to offer work, and do you have to accept it?
Right of Substitution	Can you send someone else to do the work?
Control	Who decides how, when, and where the work is done?
Financial Risk	Do you bear costs, provide equipment, or have liability for mistakes?
Integration	Are you part of the organisation’s structure or team?
Contract Terms & Behaviour	Do working practices reflect the written contract?

Prepare by gathering details about your contract, daily working practices, and how you interact with the client.

How to Use the CEST Tool: Step-by-Step

1. Identify who you are (worker, client, or agency).

2. Gather all relevant contract and working practice details.

3. Answer the questions accurately and honestly.

4. Review the determination and download the result.

5. Retain the outcome as evidence in case of future enquiry.

6. If you get “Unable to determine”, re-check your inputs or seek professional advice.

CEST is free, anonymous, and accessible online. It must be completed in one session as progress cannot be saved.

What the Results Mean

Result	What It Means
Self-employed	You are responsible for your own tax and NICs. PAYE does not apply.
Employed	PAYE and employer NICs apply. The client or agency must deduct tax at source.
Unable to Determine	The tool couldn’t reach a decision based on your inputs. You may need expert help.

Even if CEST cannot determine status, the information can help guide a manual review or professional assessment.

Limitations of the CEST Tool

• It only determines status for tax purposes, not employment law (which affects rights like unfair dismissal or redundancy).

• It cannot be used to save partial answers — it must be completed in one go.

• If inputs are manipulated or contracts are artificial, HMRC may not honour the result.

• It is most reliable when based on actual working practices, not just written agreements.

Real-World Example

A freelance IT contractor used CEST before starting a six-month contract with a major financial firm. The tool determined she was self-employed based on her right to substitute, lack of supervision, and personal financial risk. The client accepted this result and did not apply IR35. She kept a copy of the determination as evidence, which protected her in a future HMRC review.

When to Seek Professional Advice

If:

• Your status is borderline or complex

• CEST gives an “unable to determine” result

• You want independent verification of your working arrangements

…then it’s best to consult a qualified accountant, tax advisor or employment solicitor.

Summary: Key Takeaways

• The CEST tool helps clarify whether you are employed or self-employed for tax.

• Results depend on accurate inputs and understanding of working arrangements.

• Keep a record of your determination for compliance purposes.

• April 2025 updates have improved the tool’s reliability and usability.

• Status checks are vital for avoiding unexpected tax liabilities or penalties.

Frequently Asked Questions about Employment Status for Tax

• What is the Check Employment Status for Tax (CEST) tool?

  The CEST tool is an online service provided by HMRC that helps determine whether a worker should be treated as employed or self-employed for tax purposes. It is used by contractors, businesses, and agencies to check employment status, especially in relation to IR35.

• Who should use the CEST tool?

  The CEST tool should be used by contractors, freelancers, end clients, and recruitment agencies who need to assess employment status for tax and National Insurance obligations.

• What does the CEST tool ask about?

  CEST asks questions about mutuality of obligation, right of substitution, control, financial risk, and integration into the organisation. These factors help determine if someone is employed or self-employed for tax purposes.

• What do the CEST tool results mean?

  A "Self-employed" result means you are responsible for your own tax and NICs. An "Employed" result means PAYE applies. An "Unable to determine" result means the inputs didn’t provide a clear outcome and further advice may be needed.

• Does HMRC stand by CEST results?

  Yes, HMRC has stated it will stand by CEST results as long as the information provided is accurate and the tool is used in good faith, without artificial contract arrangements.

• Is the CEST tool legally binding?

  No, the CEST tool is not legally binding, but it provides strong evidence for tax status. It only determines status for tax and National Insurance, not for employment law purposes.

• What should I do if the CEST tool can't determine my status?

  If the tool gives an "unable to determine" result, review your inputs, try again, or seek advice from a qualified accountant or tax adviser familiar with employment status and IR35.

• Can limited company contractors use the CEST tool?

  Yes. Contractors working through their own limited companies can use CEST to assess whether their engagement falls inside or outside IR35. The tool considers factors like substitution, control, and business risk.

• Do public sector organisations have to use the CEST tool?

  Public sector bodies and medium or large private sector organisations are responsible for determining the tax status of workers they engage. While use of CEST is not mandatory, it is the tool provided by HMRC and determinations made using it in good faith are supported by HMRC.

• Is there an alternative to the CEST tool?

  Yes. If CEST produces an "unable to determine" result or you want further clarity, you can seek a manual review with a qualified tax advisor, employment lawyer, or use detailed HMRC guidance in the Employment Status Manual to manually assess status.

• What happens if my status is assessed incorrectly?

  If your employment status is assessed incorrectly, HMRC may pursue backdated Income Tax and National Insurance. It's important to keep accurate records and save CEST determinations to demonstrate due diligence.