More Self-Employed, More Tax Burden

Figures from the Office of National Statistics (ONS) show that the number of self-employed workers in the UK has grown significantly with the total number of people registered as self-employed currently standing at 4.2 million.

Furthermore, since 2010, one in every three "new jobs" that have been created has been a self-employed role.

ACCA has said that this increase in the self-employed workforce means that more workers are facing a complicated self-assessment tax regime and, with the recent changes to child benefits, many more people are expected to go down the self-assess route.

It is believed that as many as 500,000 parents have entered the tax system as self-assessment so that they are able to deal with the complex new changes in child benefit.

The self-assessment system, according to ACCA, was supposed to be easy. As head of taxation at ACCA, Chas Roy-Chowdhury says:

"The once famous mantra that tax doesn’t have to be taxing holds no weight now for the growing number of self-employed in the UK. The tax system should be as simple and consistent as possible, especially when you are trying to get your business up and running, which is often the case for many self-employed people."

ACCA has compared self-assessment to the tax regime that small businesses must endure and believes that the self-employed are starting to face the same challenges that UK SMEs currently face.

Globally, SMEs spend an average of 36 working days every year ensuring that they meet and comply with tax regulations.

As an example, the new General Anti-Abuse Rules (GAAR) come into effect later this year and ACCA are worried that taxpayers may be unaware of these latest regulations. The accountancy body are urging tacxpayers to ensure that they are not affected by these latest rules.

Chas Roy-Chowdhury continued:

"The rise in those who are self-employed is good news, but the reality is that those who have turned to freelance work in order to pull themselves out of unemployment and those who have decided to work for themselves face a challenging tax maze that could land them in hot water should they get it wrong."

"It is easily forgotten that the self-assessment regime amounts to taxpayers doing the Government’s tax collecting paper work for free, but if it is wrong or late they can be penalised."

Anybody concerned by the complexities of self-employment should contact the HMRC or a qualified accountant.

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For further business advice see our articles on Tax for the Self-Employed and Self-employment: Is it Right for You?

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