In a notable boost to the financial prospects of self-employed workers, TaxScouts, the pioneering tax management platform, has reported a remarkable 12 percent urge in annual incomes among this cohort.
However, despite this encouraging growth, a persisting disparity looms large as self-employed individuals continue to earn 32 percent less than their employed counterparts.
Data gathered from over 13,400 self-assessments submitted by TaxScouts users between 2019 and 2023 serves as a compelling testament to the robustness of the self-employed sector. This growth rate significantly outpaces the 7.8 percent increase in PAYE (Pay As You Earn) incomes recorded by the Office for National Statistics (ONS) and HMRC earlier this week.
This dynamic growth reflects the resilience and adaptability of the self-employed ecosystem, which has defied pandemic-induced challenges and economic uncertainty to flourish. The data underscores that self-employed workers have achieved more than double the income growth (54%) compared to their PAYE counterparts, showcasing their pivotal contribution to the national economy.
Notwithstanding this positive trajectory, the financial landscape for full-time self employed individuals remains characterised by a substantial income gap of 32 percent in relation to employed workers. TaxScouts’ analysis of the period between April 2022 and 2023 exposes an average annual income of £24,033 for full-time self-employed workers, while their employed counterparts earned an average wage of £32,300 in 2023.
These findings align with the Institute of Public Policy Research’s (IPSE) report that the national average income for freelancers in Q3 2022 was £25,887. This nonprofit organisation dedicated to the self-employed sector underscores the persistent income differential.
Challenges and the future outlook for the self-employed
While the surge in income growth is promising, lingering concerns about the cost of living crisis and the looming spectre of recession remain. The self-employed sector, still grappling with the repercussions of the pandemic, faces uncertainty about operating costs and long-term financial security.
According to a 2022 IPSE report, a staggering 64.7 percent of freelancers expressed apprehension about the UK economy, with 86 percent anticipating higher operating costs in the forthcoming year. Furthermore, a 2023 Institute of Fiscal Studies report highlighted a worrying decline in pension participation among the self-employed, raising questions about their financial well-being down the line.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
