Earn less money, get fewer benefits… pay more tax?

More proof that the Chancellor hates self-employed people: The Times reports that the Treasury wants to dramatically increase the amount of tax paid by people who dump well-paid jobs for less lucrative, home-based jobs.

The Times notes that self-employed people pay National Insurance at 8% instead of the 11% paid by full-time employees, and suggests:

Ministers’ particular aversion to “lifestyle” businesses is the lack of contribution they make to the economy: in general they are run from home, with no employees and the owners often have no ambitions to grow them into large companies. There are an estimated 500,000 such businesses in Britain.

I’m sure that many of the people reading this will think “well, it’s only fair that self-employed people pay the same amount of national insurance as employed people.” I’d disagree with that: if you’re an employee you get holiday and sick pay; self-employed people don’t. Your boss pays you on time; when you’re self-employed, that’s a rarity. Self-employed people pay more home insurance, pay higher car insurance, find it much more difficult to get finance, have to provide their own equipment (whether that’s a joiner’s tools or a writer’s computer), have to deal with a tax system that was designed by Beelzebub, can’t get benefit if their wage drops from £10,000 a year to £1,000 a year, etc etc etc. Financially any benefit from a lower national insurance rate is more than compensated for by the risks and costs of going it alone.

As the article notes:

John Whiting, a partner at accountants PricewaterhouseCoopers, pointed out that while there are tax advantages for the self-employed over employees, they also receive fewer benefits and have to take more risks emotionally and financially than employed people. “All this seems to be forgotten,” Mr Whiting said.

I suspect that this move, like the recent rise in NI rates for everybody and the growing number of stealth taxes, is motivated by a desire to increase the tax take without boosting the headline rate of income tax. Which is a bit rich when the government cheerfully flogs off the Inland Revenue’s buildings to a company based in a tax haven, and Murdoch’s News International doesn’t pay a penny in corporation tax thanks to some clever financial footwork. Compared to those activities, any lack of revenue from the self-employed sector is very small beer indeed.