Self-employed Weighed Down by Tax

Owner managed businesses cite tax as a barrier to growth

With a record number of people in self-employment; 4.6 million representing 15% of the UK workforce, back in July 2015 the Government commissioned Julie Deane, the entrepreneur who founded The Cambridge Satchel Company, to carry out an independent review of self-employment in the UK.

Her remit was threefold:

1. Explore why people opt to be self-employed as well as the different types of work that they carry out, including freelancers.
2. Examine the challenges and issues faced by those who are self-employed, particularly when setting up or developing their business.
3. Recommend how the UK can create a more flexible and supportive environment.

The findings of that report have now been published in a 41-page document titled, ‘Self-Employment Review – an independent report’.

Taxation and accounting matters

Many of those who took part in the review expressed their concerns about a lack of knowledge regarding finance, cash flow, bookkeeping and taxation. In particular, taxation was repeatedly condemned as a barrier to growth.

The review sought to understand what advice and support was available to those contemplating starting a business and whether it was useful and if there was anything that was missing. Of those who thought more information was needed, advice on cash-flow, book-keeping and record keeping was most popular, followed by advice on tax returns and tax matters, practical advice on how to run a business, and the pros and cons of being self-employed.

When asked what piece of advice was most useful or which they would recommend to those thinking about starting out, tax planning and understanding how to register as self-employed for tax, along with financial planning were the most important areas that respondents suggested.

To remedy this gap in knowledge Ms Deane suggests that taxation and accounting should be incorporated into the National Curriculum so as to prepare young people for the role which self-employment might play in their future

Advice and support

It is important that businesses are able to access advice and support and the report suggests a central portal from which to navigate impartial support and services as vital. There is currently much confusion over the duplication of information and advice on offer from Government bodies and therefore the Government should consider reviewing how well information on its official website, ‘GOV.UK’ signposts the self-employed to the resources already available.

Regulation

Excessive regulation and red tape consistently cropped up as issues affecting the self-employed. When asked on an online survey what Government could do to make working for yourself easier, 65% of people identified removing red tape as their main issue; with 39% listing red tape as the top priority to be addressed.

Overly complicated legislation and administration is costly for the Government and stifling to the growth of businesses and needs addressing in a clear and common-sense manner.

Equal treatment

For those starting or extending a family the report states that support provided by the Government should be consistent whether the beneficiary is employed or self-employed. It is therefore recommended that the Government should consider enhancing the level of Maternity Allowance to the self-employed in the first six weeks thereby bringing Maternity Allowance in line with Statutory Maternity Pay.

The introduction of a new Adoption Allowance should also be considered for the self-employed, in line with Statutory Adoption Pay.

Employment Status

Unsurprisingly, the lack of a legal definition of self-employment is causing an issue amongst the ranks of the self-employed. Julie Deane suggests that this should be simplified and clarified with a single definition for tax and employment law.

There are a total of 10 recommendations that the report makes, the entirety of which can be found in the Self-Employment Review document.