Note: Horizontal axis shows labour cost (gross earnings + employer NICs) for employment and gross profits (earnings) for self-employment; marginal rates are expressed as a percentage of that labour cost / profit. The charts assume all income is from earnings. Employment lines assume earnings are stable throughout the year and ignore the employment allowance.
Source: Authors' calculations using tax rates from IFS Fiscal Facts.
Lower headline tax rates on self-employment than on employment aren’t justified by differences in benefits or employment rights, and are poorly targeted at improving investment incentives.