Bright Blue, the independent think tank for defending and improving liberal society, has today published a new report, Working it out: a new deal for the self-employed, setting out how the UK’s 4.57 million self-employed people could be given the same state protections as employees, funded by taxing employment and self-employment at the same rate.
The report unearths the key characteristics of the self-employed and benefits and disadvantages of self-employment in the UK. It finds that the self-employed, the number of which has been rising for decades, receive less income protections and enhancements than employees — but which are overwhelmingly paid for by employers in the case of employees — while paying substantially less in tax than employees on the same earnings.
The report argues that the current system taxes identical work at very different rates. An employee earning £39,000 sees £7,214 taken in National Insurance across employee and employer contributions. A self-employed person with £39,000 in profits pays £1,586. The gap costs the Exchequer £10.05 billion a year. Under Bright Blue’s proposal, employers’ National Insurance, currently 15% on earnings above £5,000, would be scrapped entirely, and employees’ Class 1 rates would be cut to match the lower Class 4 rates paid by the self-employed. Income Tax would rise to compensate. This would be done gradually. The self-employed would pay more tax overall but employees would pay no more tax and, under a model that achieves fiscal neutrality rather than revenue raising, employees would actually pay less tax overall.
This reform follows the direction set by the 2010 Mirrlees Review and by Tax Reforms for Growth (2025), which was signed by the Adam Smith Institute, the Centre for Policy Studies, the IPPR and the Joseph Rowntree Foundation among others. The US, Canada and Germany already tax employment and self-employment equally.
The report is based on original nationally representative polling of 1,000 self-employed UK adults, two focus groups, cluster analysis of the polling data, an invite-only expert seminar and a series of bilateral consultations.
Bartek Staniszewski, Head of Policy at Bright Blue and co-author of the report, commented:
“Our current system was envisioned at a time when the self-employed paid a little less in tax to receive a lot less in social security. This time is now gone. The self-employed are more insecure than ever and, even though they pay far less in tax than employees while receiving only a little less help from the state, think that the system is squarely against them.
“Clearly, a new deal for the self-employed is necessary. As our report shows, better protections for the self-employed and fair tax treatment for all would be welcomed by the self-employed themselves all while either raising billions of pounds for HMRC or putting billions back in the pockets of employees.”
Polly Billington MP, Parliamentary Under-Secretary of State at the Department for Energy Security and Net Zero, commented:
“Freelancers and the self-employed are the backbone of many of Britain’s fastest-growing industries, yet they are too often overlooked by policymakers. Through the work I’ve been doing, I’ve heard time and again about the lack of employment rights, financial security, and tailored support they face. This important report from Bright Blue makes a compelling case for ensuring freelancers get the recognition, protections, and backing they deserve as a vital part of our economy.”
The key findings from our fieldwork include:
- 37% of the self-employed in the UK have been unable to find any work at all at least once in the past three years, rising to a majority (52%) among the self-employed from low-income households (income of less than £20,000 per year).
- A quarter (25%) have no savings of any kind, rising to 37% of the self-employed from low-income households.
- 27% have no retirement savings whatsoever, including 26% of those aged 50 to 64. Among the self-employed from low-income households, the figure is 43%.
- 42% of the self-employed hold no insurance of any kind: contents, life, health, capital, wage or sick pay. Among the self-employed from low-income households, this rises to a clear majority (62%).
- 42% have been unable to work because of poor physical health at least once in the past three years, and 34% because of poor mental health. There is no equivalent of Statutory Sick Pay for the self-employed.
- Only 20% think the current trade-off is fair between the benefits of self-employment and the relative lack of government support. 43% say the benefits do not make up for it.
The report makes nine recommendations:
- Auto-enrol the self-employed into a pension through Making Tax Digital, starting at 1% of earnings and phasing to 4% over six years, with a government contribution phasing from 1% to 3%.
- Uprate Maternity Allowance so self-employed mothers receive 90% of earnings for the first six weeks, as employed mothers do.
- Create a Paternity Allowance for self-employed fathers, worth £194.32 a week for two weeks — the first paid paternity leave the self-employed have ever had.
- Allow the surrender of Maternity Allowance weeks to count towards Shared Parental Pay eligibility.
- Mandate that the self-employed enrol in either a private or state-backed income protection insurance scheme covering accident and sickness, paying at least £475 a month.
- Base the Universal Credit minimum income floor on a rolling average of the last 12 months’ earnings, after the start-up period.
- Enrol the self-employed in the Government’s proposed Unemployment Insurance scheme, worth £138 a week for up to six months after three years of contributions.
- Make the self-employed eligible for state-funded Medical Suspension Pay for up to 26 weeks.
- For government to pay for all these new income enhancements and protections, move gradually towards equalising National Insurance rates between the self-employed and employees, by abolishing employers’ National Insurance, merging Class 1 and Class 4, and raising Income Tax to compensate. The self-employed would pay more tax overall but employees would always pay no more tax and, under a model that achieves fiscal neutrality rather than revenue raising, they would actually pay less tax overall.
ENDS
Notes to editors:
To arrange an interview with a Bright Blue spokesperson or for further media enquiries, please contact Henry Clifford on henry@brightblue.org.uk or 07505 932007.
- Bright Blue is the independent think tank and pressure group for defending and improving liberal society.
- This report is kindly funded by the Joseph Rowntree Foundation. Bright Blue retains total editorial control over all its outputs, including this publication. The sponsor does not necessarily endorse the arguments and policies in this publication.
- The report was authored by Bartek Staniszewski, Head of Policy at Bright Blue, and Dr George Pickering, Researcher at Bright Blue.
- Polling of 1,000 self-employed UK adults was conducted between the 17th and 23rd of February 2026 by Opinium. Two 90-minute focus groups were conducted in January 2026 in order to understand in detail the financial experiences and challenges faced by low-income self-employed people and to co-design new policies to build a better safety net for them. Each focus group had seven self-employed people, and every participant was earning under £40,000 a year. The focus groups were facilitated by Opinium.
- Bright Blue’s Board includes Diane Banks, Philip Clarke, Alexandra Jezeph, Richard Mabey and Ryan Shorthouse.
- Our advisory council can be found here. We also have 107 parliamentary supporters. Members of our advisory council and our parliamentary supporters do not necessarily endorse all our policy recommendations, including those included in this press release.
