Tax advantages could create self-employed winners and losers
Considerable tax advantages enjoyed by freelancers in highly paid roles has driven the rise of self-employment in Britain, according to a new study.
The report, from the Resolution Foundation think tank, found that 60 per cent of those registered as self-employed since 2009 were in such highly paid sectors. Freelance roles in advertising increased by 100 per cent in the past eight years.
The organisation assessed recent growth in self-employment to conclude that privileged? sectors with higher wages, such as banking and the public sector, had created two distinct tribes? of self-employment in the UK, with low-paid gig economy workers remaining in precarious? employment.
According to the analysis, a primary advantage lay in the exemption of National Insurance (NI) contributions. The NI tax benefit is set to cost the Treasury 6bn a year by 2020, with almost 60 per cent going to the privileged sectors.
Illustrating the tax advantages of the highly paid self-employed, the study cited the example of a freelance worker costing a business 100, 000 per year that enjoys a 7, 000 tax benefit over a full-time employee on the same salary.
In contrast, the low paid self-employed in insecure roles are forced to absorb the double hit of minimal tax advantages from low salaries, as well as missing out on workplace benefits such as the National Living Wage, sick pay and maternity leave.
Further disadvantages uncovered in the report between the two strands of self-employment found that workers in lower paid sectors were less likely to receive training at work or own their own home.
The Resolution Foundation recommended that the revenue generated from tax advantages be used to support lower income households and even the playing field.
Commenting on the study, Adam Corlett, economic analyst at the Resolution Foundation, said that the growth in the self-employed workforce had been the biggest jobs story? of the past ten years.
Praseeda Nair is the editorial director of Business Advice, and its sister publication for growing businesses, Real Business. She's an impassioned advocate for women in leadership, and likes to profile business owners, advisors and experts in the field of entrepreneurship and management.
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