THE STRUGGLES OF THE SOLE TRADER

One in five sole traders doesn’t make their first anniversary, and six in ten have failed by their 5^th year, according to a recent study by the Institute of Fiscal Studies (IFS) and funded by the Office for National Statistics.

Between 2014 and 2015 650,000 sole traders started up but 580,000 closed during that same period, giving a net gain of 70,000.

Jonathan Cribb, senior research economist at IFS said “The growth in self-employment is an important and substantial change in the labour market.  We show for the first time how misleading it is to discuss the self-employed as a fixed group – there is a huge churn in the self-employed population with hundreds and thousands of people trying a business venture and failing quickly each year.”

Between 2011 and 2015 2.4 million people were operating as sole traders each year, but 6 million tried self-employment over the same period. This indicates that, whilst the number of sole traders remains fairly consistent, the people within the group change each year.

Business owners have been the fastest growing sector of the UK workforce. A third of the growth has come from foreign-born sole traders since 2007.

Helen Miller, deputy director of the IFS, said sole-trader business owners are at a disadvantage when it comes to business tax “Behind the staggering growth in business ownership………..lies a hefty tax penalty on employment relative to self-employment.  Preferential tax rates for business owners is a “one size fits all” approach and that fails to provide the support that some need whilst giving unjustifiable tax breaks and incentives to others.  Low and falling incomes among the self-employed and low levels of investment among small business more broadly should lead us to question why we are incentivising people to quit employment and start their own business.”

Source : Accounting Age