Obviously the rate you charge would not stay the same if your effective tax rate goes up In time, that may become true, assuming the market will bear the highe

Obviously the rate you charge would not stay the same if your effective tax rate goes up In time, that may become true, assuming the market will bear the higher rates. Even that won't necessarily happen, because at some point the higher direct costs of bringing in flexible labour may start to outweigh the benefits of not hiring in-house staff. And as you say, in some industries, there is also the risk of being undercut by cheaper competition working in lower tax environments abroad. In any case, in the shorter term, you can't just turn around to existing clients and say you're putting their rates up because your taxes changed. You've already got contracts in place and agreements made, and the risk of the business environment changing is borne by the contractor/freelancer/consultancy. The two are very much equivalent for a large number of small businesses, such as software development and consulting services (not just single person companies). I don't think that's entirely true even if the direct financial investment in starting the business is low. There is still some overhead, because you have to deal with business paperwork, preparing and filing annual financial statements, in many cases administering a pension scheme these days, handling all the tax and accounting overheads, etc. More importantly, when you go independent you take on a lot more risk and give up a lot of the security and benefits that come with being an employee. The benchmark of 50-100% higher fees than salary for a similar position is mostly not caused by direct financial differences, it's caused by the uncertainty and inefficiency that come from working from one gig to another, needing to take time out to find new clients and set up new contracts, and so on. In other words, you have to cover the fully loaded cost of an employee to an employer, and you have to do it without the economies of scale of a larger business when you first start (and possibly for much longer). So even for those businesses with relatively little up-front capital investment, there is still a lot of investment in other respects that goes into getting a business started and keeping it going. And this brings me back to my basic point that if you try to equate income received by an employee with income received through an independent business, even if you allow for the direct financial effects like employers' NI contributions, it's still very hostile to small businesses to increase dividend tax dramatically as the UK government did not long ago.