Can you start a business while employed in the UK?

Is it legal to run a business while employed?

There's no law that stops an employee running a business on the side. GOV.UK says plainly that you can work for an employer during the day and run your own business in the evenings.

What limits you is your contract, plus a duty that applies to every employee whether it's written down or not. You owe your employer loyalty, sometimes called the duty of fidelity. In practice that means you mustn't compete with them while you work there, and you mustn't share or use their confidential information. A side business that does neither is very unlikely to cause a problem.

What to look for in your employment contract

Read your contract properly, along with any staff handbook or policies it points to. Rules on outside work and conflicts of interest often sit in a separate policy rather than the contract itself. You're looking for four kinds of clause.

• Exclusivity or outside work clauses. Some ban other paid work. Many just say you need permission first, which usually means asking.
• Conflict of interest clauses. These ask you to declare anything that could clash with your job, such as doing work for a client or supplier.
• Intellectual property clauses. These set out who owns ideas, designs, code and content you create.
• Restrictive covenants. These limit what you can do after you leave, such as setting up in competition or approaching clients.

Avoiding a conflict of interest with your employer

The simplest rule is not to compete. If you're an accountant at a local firm, setting up your own bookkeeping service for small businesses in the same town is a direct clash. A weekend photography business isn't.

The grey area is work that's related but not the same. Say you're a marketing manager at a software company and you want to help local cafés with their social media. You're not chasing your employer's customers, but you're using the same skills. That's usually fine, but it's exactly the kind of thing a conflict of interest policy expects you to declare.

Never approach your employer's clients, suppliers or colleagues for your business while you work there. Even if your contract says nothing about it, it's likely to break your duty of loyalty.

Who owns what you create: IP and your side business

Under UK copyright law, if you create something as an employee in the course of your job, your employer is the first owner of the copyright unless you've agreed otherwise. Inventions work in a similar way under patent law. So a logo, app or training course you make as part of your role belongs to them.

Things you make in your own time, on your own equipment, that have nothing to do with your job are normally yours. Problems start when the line is blurry, and some contracts have wide IP clauses that try to claim anything connected to the employer's business.

• Keep a clear gap between your job and your business, in subject as well as time.
• Use your own laptop, phone, email address and software accounts.
• Don't save business files on work systems or work cloud drives.
• If your idea is close to your employer's field, ask them to confirm in writing that they don't claim it.

Using work time, equipment and confidential information

Do your business outside working hours. That includes not answering customer messages during the day unless you're on your lunch break and using your own phone. Small habits, like checking orders on a work laptop, are often what lead to awkward conversations with HR.

Confidential information covers more than trade secrets. Client lists, prices, supplier terms, internal processes and plans for new products can all count. Using any of it to give your business a head start breaks your duty to your employer, and it can still be a problem after you leave. If you only know something because of your job and it isn't public, leave it alone.

Working hours: does the 48 hour limit apply?

The Working Time Regulations say you shouldn't work more than 48 hours a week on average, normally measured over 17 weeks. If you have more than one job, your combined hours count, though you can opt out in writing.

The limit applies to work you do for an employer, so hours spent on your own business don't normally count towards it. What matters more is your day job. Acas points out that extra work elsewhere becomes an issue when it affects how you do your main job. For a routine that doesn't wear you out, see how to run a side business with a full-time job.

Should you tell your employer about your side business?

If your contract or policies ask you to get permission or declare outside interests, you have to. If they say nothing, you don't legally have to, but telling them is often the safer choice, especially if your business is anywhere near your field. A yes in writing protects you if someone raises it later.

If your contract bans outside work altogether, asking is still the right move, because ignoring the clause could lead to disciplinary action. Employers often agree to something small and unrelated when it's explained properly. There's one exception to know about. If you're on a zero hours contract, or you earn less than the lower earnings limit of £129 a week, your employer can't enforce an exclusivity clause against you or dismiss you for working elsewhere.

When you do tell them, keep it short and factual. Say what the business does, that it's outside working hours, that it doesn't compete with them or use their clients or information, and that it won't affect your work. When you're ready to go full time, our guide on how to tell your boss you're leaving covers that conversation.

Tax when you're employed and self-employed

You can be employed and self-employed at the same time. Your salary carries on being taxed through PAYE as normal, and your business income is dealt with separately through Self Assessment.

The first £1,000 of gross income from self-employment each tax year is covered by the trading allowance. Above that, you need to register for Self Assessment by 5 October after the end of the tax year you started, then file a return and pay by 31 January. If your salary already uses up your £12,570 Personal Allowance, your profit is taxed at your main rate, which is 20% for basic rate taxpayers in England, Wales and Northern Ireland. Scottish rates are different. Class 4 National Insurance is worked out on your business profit alone, so you only pay it once that profit goes over £12,570.

Use the side hustle tax calculator to estimate what to put aside, and read side hustle tax in the UK for the detail. Keep a simple record of every sale and expense from your first one.