The gig economy versus the tax system


It’s the 1st of December, it’s cold, and the party season is upon us, which means the comfort and ease of grabbing an Uber ride, or ordering food to be delivered is more appealing than ever. But with convenience comes cost – and it’s not just your wallet that’s feeling the hit.

The last few years have seen an unprecedented change in work trends with the rise of the gig economy which includes firms such as Uber and Deliveroo. These online platforms have made it easier  for people to work in different, high-tech ways, but in his Autumn Statement, Philip Hammond flagged growing concern in government about how they can ensure that the taxation of different ways of working is fair between different individuals, and sustains the tax-base as the economy undergoes rapid change.

Setting up a company can mean paying even less tax than traditional “employer-employee” situations or being self-employed. The Office of Budget Responsibility (OBR) highlighted the big tax savings involved in establishing a company: switching to a corporate form could save employed and self-employed individuals £3,300 and £700 a year respectively, if they had the incomes of £30,000 a year. Moreover, the savings are set to increase even further to £4,200 and £1,000 respectively – with the planned cut in the corporate tax rate to 17%.

There is no doubt that this is going to be a major challenge for the government.  On the other hand, thanks to the growth of self-employment the labour market is incredibly diverse and flexible with an adaptable workforce who are getting used to instability becoming the new normal.


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