Low Incomes Tax Reform Group call for reassessment of relationship between taxation and the gig economy
For many people, the Deliveroo courier is the most ubiquitous face of the gig economy, as seen in Godiva Square, Coventry. Image by Nrqemi (via Shutterstock).
Second only to ‘strong and stable’, the phrase ‘gig economy’ has got under the skin of many people. It refers to residual work of a precarious nature. If earnings are too low for National Insurance contributions, this affects your entitlement to the State Pension and some DWP benefits. For many people, the kind of work is a residual top-up further to their main job. For some, it is their sole income source.
In the main, people working in the gig economy are self employed instead of being salaried workers. With the emphasis on employment security, the Low Incomes Tax Reform Group has called for a reassessment of its relationship with taxation. They have called for its addition in the next Taylor Review of employment practices.
If you are self employed, you need to pay Class 2 and Class 4 National Insurance contributions. At present, the Class 2 rate is £2.85 per week, so long as your profits are above the Small Profits Threshold. Class 4 NI is dependent on being above the Lower Profits Limit. To maintain your entitlement to social security benefits, there is also a voluntary Class 3 rate, presently £14.25 per week.
Strictly speaking, self employed status means you could pitch for work from a number of sources as a sole trader. Self employed in the gig economy sense means you are bound by, for example, Deliveroo’s terms. This is why the LITRG has called for a default Worker status in the UK’s tax codes. On the 04 May, their submission to a Business, Energy and Industrial Strategy report has been recommended by the Work and Pensions Committee.
The reasoning behind LITRG’s suggestion, is to make sure workers in the gig economy aren’t denied access to the State Pension and social security benefits.