Question to the HM Treasury:

To ask the Chancellor of the Exchequer, what estimate she has made of the average net effect on overall tax receipts when an individual moves from direct waged employment to (a) self employment or (b) contracting with a temp or staffing agency, all other things being equal.

In July 2025, in its Fiscal Risks and Sustainability assessment, the independent Office for Budget Responsibility assessed there was a low risk to the public finances of increasing self-employment. The risk was assessed to have decreased since the last assessment in July 2023.

Whether someone is employed or self-employed depends upon the terms and conditions of the relevant engagement.

The manner in which a worker is engaged will have consequences for the tax that they, and their engagers, have to pay. Most agency workers must be treated as employees for income tax and National Insurance contributions (NICs) purposes by the agencies that pay them.

These agencies are required to make deductions of income tax and employee NICs, where these are due, from the workers’ pay in the same way and at the same level as with direct employees. The agencies will also be liable to pay employer NICs, where these are due, in respect of payments to the workers.

HMRC publish guidance on determining employment status: https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm0500.

HMRC have also published guidance on agency rules and examples of where the rules apply: https://www.gov.uk/hmrc-internal-manuals/employment-status-manual/esm2000.