High-Earners Lead Self-Employment

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The UK has seen significant growth in self-employment over the past several years, and a recent report has shed new light upon the nature of this trend. According to a study by an economic think tank, it is high-earning individuals who have been the driving force behind the increase in self-employment.

Self-employment undeniably plays a major role in the UK economy at present. It has been a rapidly-growing area for several years now, accounting for half of the employment growth in the UK during that time. There are currently just under five million individuals in the UK who are self-employed (including those who have a second job or “sideline” in self-employment alongside an employed role). This is well ahead of many other types of somewhat non-typical employment. For example, the UK’s agency workers currently number only around 850,000.

The Resolution Foundation examined trends in self-employment, and found that higher-earners were disproportionately represented in the growth of self-employment over the past several years. Since 2009, 57% of self-employment growth has been made up by what the foundation called “privileged” self-employed individuals – those who are well-qualified and work in higher-paid fields. These include professionals in the accountancy, legal, and health sectors among others. These “privileged” self-employed people commonly achieved income in the £45,000-65,000 range annually, much more than that of the average UK worker.

There is such a divide between these workers and other self-employed individuals, the Resolution Foundation says, that the self-employed are now not so much one group as two quite separate and distinct ones. Those who do not fit into the privileged group not only earn less, but are more likely to be underemployed and to receive tax credits.

The Resolution Foundation’s Adam Corlett says: “Rising self-employment has been the biggest jobs story of the last decade… but behind the headlines the real recent growth area for the self-employed has been in lucrative sectors such as advertising and banking.”

Many news stories and much popular discussion about self-employment growth has focussed on typically lower-earning individuals finding new and more lucrative opportunities by striking out on their own. However, this is in many ways at odds with the picture of self-employment painted by the Resolution Foundation’s report, in which individuals who are already well-qualified high-earners are heavily represented. Many of those who have been the subject of public discussion, such as self-employed drivers for delivery services or drivers for Uber, have found themselves in a work situation which the foundation describes as “precarious.”

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Millions of Tax Returns “Unnecessary,” say Critics

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Critics are claiming that millions of people across the UK are filling out tax returns that are just not necessary. It is claimed that a large portion of those filling out tax returns are required to do so despite not owing HMRC any money at all.

At present, an annual tax return is required of roughly a third of taxpayers across the UK. Nearly a quarter of them (24%) owe very little – less than £50 for the entire year – and two thirds of these (16% of the total number who must fill out a tax return) owe nothing to HMRC at all.

Some of those who must complete a tax return are sole traders or owners of businesses which have not turned a taxable profit – in which case a tax return is necessary to show HMRC that profits have not reached taxable levels. However, many others are required to complete a tax return for entirely different reasons. For example, company directors and employees earning over £100,000 per annum must complete a yearly tax return even if they have no additional, undeclared income whatsoever. Furthermore, recent changes to the administration of child benefit mean that one parent or guardian often finds themselves with the need to submit a self-assessment tax return even if they do not owe HMRC money.

Others, however, may register for self-assessment voluntarily even if no money is owed to HMRC. For those in some unusual and specific financial circumstances, tax returns can serve as useful records to assist with things like applications for loans.

HMRC has defended itself from these criticisms, however. A spokesperson said that the organisation “[doesn't] want anyone to fill in a tax return unless it’s absolutely necessary.” For this reason, he claimed, HMRC automatically takes 400,000 people out of the self-assessment process each year.

The spokesperson also insisted that HMRC goes to great lengths to ensure that the self-assessment process is as easy as possible for those who do have to complete an annual tax return. In particular, he pointed to the organisations’ “bringing in short tax returns and online self-assessment, and we are taking this much further by introducing the new digital tax accounts.”

Indeed it is hoped that new online tax accounts, which will be regularly updated with information about people’s income, could almost completely eliminate the problem of people filing unnecessary tax returns. Fully rolling out this new process, however, is likely to take some years.

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