Contractor expert: HMRC’s worker status survey “biased” against self-employed and impeding Labour’s growth plans

By Katherine Steiner-Dicks Last updated May 29, 2025

HMRC’s latest worker status survey, designed by its own experts, has been slammed as “biased” and “ineffective” by legal and insurance specialists, revealing a concerning disconnect between the taxman’s understanding of self-employment and the reality of the UK’s flexible workforce.

An HMRC-commissioned study has been published this month, two years after a survey was carried out to get a general idea of the employment status of a nationally representative sample of 8,767 UK adults aged 18 to 64. The findings underscore the ineffective parameters being used by HMRC to determine worker status criteria.

Key findings:

Even with a study designed by HMRC’s own status experts, only 6.8% of individuals in paid work were identified as likely self-employed.
In the initial assessment, only 4% were identified as self-employed.
After more in-depth questioning, HMRC still couldn’t determine the status for a considerable 38% of the individuals.

HMRC’s worker status survey: flawed findings?

HMRC used a two-stage process to figure out if someone is employed or self-employed for tax purposes. This involved asking a series of questions about their work.

Initially, HMRC conducted a screening of workers to get a general idea of their employment status. From this, they believed 52% were likely employees, while only 4% seemed to be self-employed. Around 20% of the people surveyed weren’t in paid work, so they were excluded. This left 24% whose status was unclear, and they underwent further questioning.

For these 2,104 individuals whose status was initially uncertain, HMRC used more detailed questions and their own logic to try and assign a status. After this second stage, 55% were considered likely ‘workers’ (a category that often includes employees), and just 6% were deemed self-employed. Significantly, for a large portion of these individuals – 38% – HMRC’s system couldn’t definitively determine their employment status.

Overall, out of 7,013 individuals in paid work who were part of this study, HMRC was only able to identify 477 (or 6.8%) as likely self-employed.

Alarming discrepancy in self-employment figures

“When HMRC was pushing the government to implement the off-payroll rules in the public and private sectors, it claimed that 1/3rd of contractors were deemed employees, leaving the other 2/3rd (6%) of contractors as being genuinely self-employed,” says Dave Chaplin, CEO and founder of IR35 tax compliance firm IR35 Shield.

“We now see that using HMRC’s own logic, they only consider 6% of workers as genuinely self-employed, which is 1/10th of the figure they told Parliamentarians in their quest to force the off-payroll legislation onto the statute books.

According to the Office for National Statistics (ONS) data for January to March 2025, the UK had approximately 4.40 million self-employed individuals, 13% of the total UK workforce of 33.78 million.

“HMRC’s logic based on their view of status matters used in the survey appears to have no trouble picking out employees (52%),” says Chaplin, “but struggles to identify the self-employed, which makes up 13% of the working population.”

Expert criticisms: bias, ineffectiveness, and economic impact

Chaplin continues, “HMRC’s figures show that applying their thinking used in the survey, 54% of currently self-employed individuals are not truly self-employed and need to be reclassified. That cannot be true, indicating that HMRC’s view on status matters may be worryingly biased.

“With HMRC’s same view on status matters embedded into its own free Status Tool (Check Employment Status for Tax), it’s highly likely that similar bias is present, resulting in misclassification and false employment.

Chaplin argues that stats highlight a concerning disconnect between HMRC’s approach to self-employment and the realities of self-employment.

Chaplin says:

It seems HMRC assumes everyone should be on traditional payroll, overlooking the flexibility and independence that self-employed individuals value and want. This mindset risks undermining the rights of entrepreneurs to choose their working arrangements and stifles innovation and economic diversity.

Self-employment offers autonomy, flexibility and choice which are vital for a thriving economy. Instead of imposing rigid structures, HMRC should recognise the legitimacy of various work models and support the rights of individuals to be their own boss, fostering a fair and dynamic business environment.

Rebecca Seeley Harris, an Employment Status, Off-payroll & IR35 Expert, tells The Freelance Informer, “This research does not appear to be particularly helpful because there are too many caveats. Firstly, the report warns that the complexity of employment status and the limited questions used to screen participants may impact the overall result. Secondly, with 38% in the unable to determine category, it shows that the limited questions were ineffective.

“As well as taking two years to be published, this research brings little to the argument. The flexible economy is essential to the UK. So, it’s a pity that the Labour Government doesn’t recognise this and support self-employment.”

Urgent need for employment status simplification

Seb Maley, CEO of contractor insurer Qdos, says the fact that HMRC itself couldn’t determine employment status for 38% of this group “speaks volumes about just how complex assessing it can be – but the implications of getting this wrong can be huge, both for the individual but also the engager.”

He continues, “Labour promised to simplify employment status, but as it stands, we’re still in the dark concerning how this will play out specifically. This survey emphasises the need for employment status simplification sooner, not later.”