Taking the leap into self-employment is a popular step for many entrepreneurial people, but the realities of running your own business can be hard.
The Institute for Fiscal Studies, an economic research organisation specialising in UK taxation, ran a study that has discovered: “most people who try self-employment fail quickly and very few go on to employ others or create significant ventures.”
Despite the gloomy statistics, between 2000 and 2015, the number of self-employed sole traders rose by 1.4 million — representing growth of about 50%.
The institute identified three ways to work for yourself:
- self-employed sole trader – many of those surveyed are based in the construction industry
- self-employed partner – the surveyed business here included many in agriculture
- owner-manager of a limited company – a disproportionate majority of these people work in business services.
The report states that:
- One in five sole trader businesses close within their first year, and 60% fail by their fifth
- Sole trader average incomes have fallen, with over a third of sole traders having less than £10,000 of total taxable income.
- Six out of ten sole traders made less than £10,000 of profit.
- There are few sole traders with profits greater than £40,000.
- Few sole traders employ anyone else.
On the plus side, 7% of self-employed partners are in the top 1% of income tax payers – with partners in financial services achieving particularly high incomes. However, generally, sole traders who remained in business during the economic downturn suffered a drop in profits.
It’s been claimed that the current approach to tax rates for business owners is an unfair ‘one-size-fits-all’ that fails to provide the support some businesses need, yet gives ‘unjustifiable’ tax breaks and incentives to others.
This is exactly why we support sole traders with tailor-made packages that encompass solid business growth support, along with the accounting essentials needed to encourage a profitable bottom line. We don’t number crunch; we help business owners to really grow their businesses with advice, guidance and strategic planning that works. Achieving success doesn’t need to be a struggle – chat to us and stay in the 40% that succeed!