Between 2016 and 2019, around 4.7 million (1 in 10) working adults in the UK participated in the gig economy. It is predicted that, with this level of participation and the current growth trends, the gig economy will contribute around 3.5 billion to public finances by 2020 [1].
No matter how great the speed and level of growth, the gig economy and companies operating in it have not been exempt from the growing pains of the regulations.
In particular, 2018 was a notable year of change, with both Pimlico Plumbers and Addison Lee being taken to court over the issue of the employment status of gig workers.
However, the new regulations still remain industry specific but fluid as this emerging economy is taking shape and establishing its place in the market. An example of a recent regulation from the UK Government is the right for workers to have a written statement of the terms of employment and access to transparent information about the job, which came into force from 6th April 2020. Our goal is to dissect some of the key questions about the gig economy and taxation in the UK.
What is the profile of a gig worker in the UK?
According to our data of all visitors to Appjobs, the split between the number of men and women in the gig economy remains fairly evenly split, with around 57% of those working in the gig economy identifying as male and 43% who identify as female. However, it is more likely that the younger generations will participate in the gig economy, with only 11% of those over 45 taking part in the gig economy.
How does tax filing work in the UK?
As gig workers are classified as independent contractors, they are not recognised as regular employees and therefore are responsible for filing their own taxes. Through the process of self assessment, they will determine how much they are meant to pay in taxes.
As a rule of thumb, if an individual earns more than 1,000 while working as self employed during the tax year, you will need to register with HMRC. It will also be important that you have your national insurance number, as this will make filing taxes and keeping track of them easier. It is important that you keep a comprehensive record of the exact earnings as well as the expense for deductibles.
The exact amount you earn will determine which bracket you fall into for the tax percentages and the amount of National Insurance fees you will pay: however, the first 1,000 will remain untaxed.
References
[1] O’leary J, Boultwood S. Who’s working in the ‘gig economy’. https://fullfact.org/economy/whos-working-gig-economy/ (accessed September 7, 2020)