Nearly a decade after the RSA warned that the welfare state was failing the self-employed, the issue remains urgent. The UK now has around 4.3 million self-employed workers, roughly 13 per cent of the workforce, according to the Office for National Statistics, Labour Market Overview, 2025. Yet many still lack the basic income security, parental support and pension provision that employees take for granted. With the National Living Wage rising to £12.21 an hour from April 2026 and economic uncertainty persisting, protecting self-employed living standards should be a central goal of government policy.

The self-employed workforce today

Self-employment has been one of the defining trends of the UK labour market since the turn of the century. After growing steadily for years, the sector was hit hard by the pandemic: numbers fell from a peak of around five million in 2019 to roughly 4.1 million in 2021, according to Office for National Statistics historical labour market data. Since then, the workforce has recovered to approximately 4.3 million. Women make up a growing share of the self-employed, according to ONS labour market data, with many turning to freelance, consulting or micro-business ownership to balance work with caring responsibilities. The fastest-growing segment includes self-employed women over 50, who are starting businesses in record numbers.

Despite this scale, policy has been slow to catch up. Ministers often celebrate entrepreneurship and side hustles, but the practical support available to self-employed people, especially women, remains patchy. The result is a workforce that contributes billions to the economy yet faces disproportionate financial risk.

Low pay and volatile incomes

Earnings insecurity is the most immediate threat to self-employed living standards. Resolution Foundation analysis shows that the typical self-employed worker earns significantly less than the typical employee, with a substantial minority earning below the National Living Wage once all hours are accounted for. Income also fluctuates from month to month, making budgeting, rent or mortgage payments and household planning extremely difficult.

The cost-of-living crisis has made this worse. Unlike employees, the self-employed cannot rely on a fixed payslip, paid sick leave or predictable working hours. A quiet month can quickly become a crisis, and many self-employed people report using personal savings, credit cards or cutting back on essentials to get by. For women founders juggling business and family, this volatility is especially acute.

Welfare, parental support and the safety net

The benefits system still treats self-employed workers as an afterthought. Under Universal Credit, the Minimum Income Floor can assume a level of earnings even when work has dried up, reducing support for people whose income has genuinely fallen. The floor was suspended during the pandemic but has since been reintroduced, drawing criticism from freelancers and business groups.

Parental support is another glaring gap. Self-employed mothers can claim Maternity Allowance, but it is less generous in practice than Statutory Maternity Pay because it offers none of the earnings-related top-up available to employees. In 2026/27, the standard rate of Maternity Allowance is £187.18 a week, or 90 per cent of average weekly earnings if that is lower. Self-employed fathers and partners are largely excluded from Statutory Paternity Pay and Shared Parental Pay, leaving many families thousands of pounds worse off. For Prowess, this is a clear equality issue: entrepreneurship should not mean sacrificing basic family security. You can read more in our complete guide to Maternity Pay for the Self-Employed.

Sick pay is also missing. Self-employed workers are not entitled to Statutory Sick Pay and must navigate Employment and Support Allowance or Universal Credit instead, systems that are often slow, complex and inadequate for people with fluctuating incomes.

The pensions gap threatens long-term security

Retirement security is perhaps the most overlooked area. Automatic enrolment has transformed pension saving for employees, but it does not extend to the self-employed. As a result, only around 18 per cent of self-employed people are actively contributing to a private pension, according to the DWP Family Resources Survey 2023/24. Many will depend almost entirely on the State Pension, which itself requires a complete National Insurance record.

This gap is especially worrying for women. Self-employed women often earn less, take time out for caring, and already face lower lifetime pension wealth than men. Without targeted intervention, a generation of women entrepreneurs risks poverty in later life.

Tax changes are not enough

Recent budgets have brought some welcome simplification. From April 2024, Class 2 National Insurance contributions were abolished for most self-employed people, while voluntary Class 2 payments remain available for those on very low profits to protect their benefit entitlements. For 2026/27, the main rate of Class 4 National Insurance is 6 per cent on profits between £12,570 and £50,270, and 2 per cent above that threshold. These changes cut tax bills for many, but they do little for the lowest earners or those whose profits fall below the threshold.

More importantly, tax cuts cannot replace a proper safety net. Reducing National Insurance does not create sick pay, parental leave or a reliable pension. If the government is serious about entrepreneurship, it must move beyond headline tax measures and address the structural barriers that make self-employment financially precarious. Our Self-Employed Tax UK guide for 2026/27 sets out the current rates, but the wider policy picture still lags behind.

Making Tax Digital for Income Tax Self Assessment is also now approaching. From April 2026, self-employed individuals and landlords with turnover above £50,000 will need to keep digital records and submit quarterly updates through compatible software. This adds another compliance layer for women running businesses alone, even before the underlying income security problems are solved.

How to protect self-employed living standards

Political parties of all stripes should commit to a comprehensive package for the self-employed. Priorities should include:

• Reforming Universal Credit so that fluctuating self-employed incomes are assessed fairly, without the punitive effects of the Minimum Income Floor.
• Extending automatic enrolment or a similar mechanism to the self-employed, so that more people build retirement savings.
• Equalising parental support, including maternity, paternity and shared parental pay, so that self-employed parents are not penalised for working for themselves.
• Introducing a form of portable sick pay or income protection that self-employed workers can access during illness or injury.
• Ensuring that tax simplification genuinely helps low-earning self-employed workers, rather than only those on higher profits.

Working for yourself should mean security

The RSA’s 2015 report was a wake-up call, but too little has changed. Self-employed people are a permanent and growing feature of the UK economy, yet the policy framework still assumes that everyone has a permanent employer. As the current government shapes its agenda, protecting self-employed living standards must move from the margins to the mainstream. Prowess will continue to press for policies that support women in business, whether they run a limited company, a freelance practice or a micro-enterprise, so that working for yourself does not mean going without security.