self-employment and entrepreneurship: lessons … slides tom.pdf2015-16 g others note: based on hmrc...

Institute for Fiscal Studies

4 June 2018

Self-employment and entrepreneurship: lessons from tax records and challenges for policy

A picture of business owners in administrative data Thomas Pope

© Institute for Fiscal Studies Business owners in administrative data

Business owners make up a greater share of the workforce than before the financial crisis

0%

2%

4%

6%

8%

10%

12%

14%

16% 19

94

1995

19

96

1997

19

98

1999

20

00

2001

20

02

2003

20

04

2005

20

06

2007

20

08

2009

20

10

2011

20

12

2013

20

14

2015

20

16

2017

Shar

e of

wor

kfor

ce

Business owners

Share self-employed

Share owner-manager


Source: Authors’ calculations using Labour Force Survey

Today

Use administrative data to shed more light on these populations

Focus on businesses with one owner and one manager

Self-employed: sole traders

‒ Excludes partners

Owner-managers: 1 director 1 shareholder companies

‒ Excludes multiple-director companies

Answer:

‒ How many are there?

‒ Who are they?

‒ What are they doing?


How many are there?


How many people operate in these legal forms?


0 500

1000 1500 2000 2500 3000 3500 4000 4500

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16 Si

ze o

f pop

ulat

ion

(tho

usan

ds)

~4 million sole

traders

~300,000 sole

owner-managed

companies

Note: Based on HMRC administrative data sources. Includes sole traders and 1 director 1 shareholder companies filing tax returns.

How many people operate in these legal forms?


0 0.5

1 1.5

2 2.5

3 3.5

4 4.5

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Size

of p

opul

atio

n (m

illio

ns) Self-employed Owner-managers

~4 million sole

traders

~300,000 sole

owner-managed

companies


Both populations are growing quickly

0

20

40

60

80

100

120

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Popu

lati

on (2

014-

15=1

00) Self-employed Owner-managers



25% increase in self-employed since 2007–08 600% increase in

owner-managers since 2007–08

Who are they?


Both groups are male dominated

0%

20%

40%

60%

80%

100%

Self-employed Owner-managers



Owner-manager statistics based on a data match between personal and corporate tax data in 2013–14. Sole traders statistics based

on 2015 –16

67%

75%

Male

Female

Both groups older than employees on average


0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

100%

Self-employed Owner-manager Employees

Under 35



on 2015 –16. Employee ages based on the Labour Force Survey

74% 84% 62% Over 35

Owner-managers based in business services, self-employed in construction


0% 5% 10% 15% 20% 25% 30% 35%

Business Services

Construction

Domestic services

Hairdressing

Taxis

Wholesale & Retail

Owner-manager Self-employed



on 2015 –16

What are they doing?


Self-employed aggregate turnover higher than owner-managers

0

20

40

60

80

100

120

140

Self-employed Owner-manager

Agg

rega

te tu

rnov

er

(£ b

illio

n, 2

015-

16 p

rice

s)



Self-employed turnover

less than 3x higher than

owner-manager turnover

Population more than

10x larger

On average owner-managers have much higher turnover

0

20000

40000

60000

80000

100000

120000

140000


Mea

n tu

rnov

er

(£, 2

015-

16 p

rice

s)


Average owner-

manager turnover

is 4.5x larger


Owner-managers have higher profits

0

5000

10000

15000

20000

25000

30000


Mea

n pr

ofit

(£

, 201

5–16

pri

ces)




on 2015 –16

Average business profits are lower than before the crisis


0 5000

10000 15000 20000 25000 30000 35000 40000

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Mea

n pr

ofit

s

(£, 2

015-

16 p

rice

s)



Note that business profits understates the income from owner-managed companies as directors also pay themselves a wage.

Average business profits are lower than before the crisis


0 5000

10000 15000 20000 25000 30000 35000 40000

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Mea

n pr

ofit

s

(£, 2

015-

16 p

rice

s)



Note that business profits understates the income from owner-managed companies as directors also pay themselves a wage.

-18% since

2007-08

-21% since

2007-08

Less than half of business owners invest


0% 10% 20% 30% 40% 50% 60% 70% 80%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Shar

e us

ing

capi

tal

allo

wan

ces



45%

25%

The share investing in capital in both populations is falling sharply


0% 10% 20% 30% 40% 50% 60% 70% 80%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Shar

e us

ing

capi

tal

allo

wan

ces



45% 60%

70%

25%

An even more dramatic fall in the share of self-employed employing others


0%

5%

10%

15%

20%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Shar

e em

ploy

ing

othe

rs

Note: Based on HMRC administrative data sources. Includes sole traders and 1 director 1 shareholder companies filing tax returns. A

sole-trader is registered as employing others if wage or salary costs are greater than zero

17% 7%

A large share of the self-employed have some employment activity


0%

5%

10%

15%

20%

25%

30%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Shar

e of

sel

f-em

ploy

ed

popu

lati

on

Some employment income

More employment than self-employment income

Note: Based on HMRC administrative data sources. Includes sole traders

25%

18%

But these trends are not explained by more ‘double-jobbers’


0%

5%

10%

15%

20%

25%

30%

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Shar

e of

sel

f-em

ploy

ed

popu

lati

on

Some employment income

More employment than self-employment income

Note: Based on HMRC administrative data sources. Includes sole traders

Aggregate self-employed turnover is declining


0

20

40

60

80

100

120

140

160

2005

-06

2006

-07

2007

-08

2008

-09

2009

-10

2010

-11

2011

-12

2012

-13

2013

-14

2014

-15

2015

-16

Agg

rega

te tu

rnov

er

(£ b

n, 2

015-

16 p

rice

s) Self-employed Owner-manager


Summary

4 million sole traders and 300,000 single director and shareholder companies in administrative data

Despite growing by 25%, the self-employed population accounts for less turnover now than in 2007–08

Share of self-employed with some employment income – almost 25% – has been stable over the last decade

The share investing or employing others has fallen dramatically

Average profits have also fallen substantially since the crisis


self-employment and entrepreneurship: lessons … slides tom.pdf2015-16 g others note: based on hmrc...

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