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How the self-employed community has become a key driver of economic growth

The self-employed sector of the workforce has become a phenomenon in driving economic growth in the UK. Since 2001, the number of self-employed individuals has grown by more than a third, with 4.7 million people registering as self-employed in 2015. The traditional view of a self-employed individual is a sole-trader, but more recently the business “owner-manager” has emerged as people look to protect their business through the incorporation process.

It therefore must be asked, what are the incentives that have driven the popularity of self-employment in the British workforce? Firstly, the financial benefits of self-employment appear to play a large part in the culture shift. This has become a controversial discussion point for the government, as the tax system appears to encourage individuals to work for themselves. Take the example of an employee earning £40,000, which would generate £12,146 in income tax and national insurance payments. A self-employed person however would be liable for £3,000 less, taking advantage of the different tax and national insurance regulations. After the failed reform regarding national insurance contributions for the self-employed, championed by Chancellor of the Exchequer Philip Hammond, leaving the treasury to face issues surrounding a revenue short fall in the future.

However, most of the self-employed community cited other key factors that contributed to their motivations for going out on their own. Many of these individuals stated that they wanted to “take control of their professional lives”, choosing their own working hours and picking their own clients. Whilst the financial benefits were prevalent, the majority of those surveyed agreed that this ownership of control was more highly valued than the economic rewards of self-employment. This aspect was of particular importance to those with young families, for whom freelance work allowed them to avoid the time constraints of permanent employment, enabling them to choose their own working hours and have a period of time off before accepting new contracts.

Of course, there are disadvantages in becoming your own boss. There is no sick or maternity pay package that comes with self-employment, but some argue that the lack of these perks balances out the tax advantages of setting out on your own. However, it has been pointed out by researchers from the Institute of Fiscal Studies that this welfare support is supplied by a company, rather than the UK government. In addition, whilst long periods without work can be favourable in some circumstances, this can also have a detrimental effect on the financial security of a self-employed individual.

The boom of the self-employed workforce over the last two decades has proven the popularity of setting up your own business. Freelance work is available in almost any industry and most people have claimed that once they became self-employed, they never looked back! You may no longer be waiting for that promotion to come up, but instead choosing your own contracts and having autonomy over the direction in which you wish to head.

Information Provided by: The Sunday Times (https://www.thetimes.co.uk/past-six-days/2017-06-18/business/day-rate-nation-zj8ngxgm0)

Image Provided by: Flickr

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