FSB warns of tax rises for self-employed

People turning to self-employment may be stung by higher tax penalties, the Federation of Small Businesses (FSB) has warned.

With the UK facing high unemployment, the FSB is expecting a record 300,000 people to become their own boss this year by setting up small businesses.  However, there are concerns that those who are contracted to work for another company for a few months may be put into the PAYE bracket by the taxman, and have their status changed from self-employed to employed.

John Walker, national chairman of the FSB, said: “Unemployment continues to be a worry for everyone, and this year we are expecting more people to become their own boss and go it alone by setting up in business, which will both help the economy grow and tackle unemployment as these businesses flourish.

“However, those who do become self-employed need to be aware of the taxman who is penalising these people when they work for other companies, putting them in the PAYE bucket and turning their legal status from self-employed to an employee.”

Those who work from home, such as hairdressers, plumbers or interior designers are unlikely to be affected.  But the FSB is calling on HMRC to respect a declaration of self-employment as just that.

© Crimson Business Ltd. 2010