The Treasury is adding the finishing touches to revamped tax rules which in their current form are seen as enabling the self-employed to pay less in national insurance contributions, according to the BBC.
Self-employed people who set up private companies to take on work are on the Treasury's radar, with the move likely to be confirmed in the Budget on 29 October 2018.
Research from the Office for National Statistics said there were 4.8 million people registered as self-employed in 2017.
Treasury officials claim around a third of those claiming self-employed status through personal service companies should be paying more tax through PAYE as they are effectively employees.
It warns that HMRC could be up to £1.2 billion a year out of pocket by 2023 if reforms are not pushed through.
Businesses that use contractors from personal service companies face the prospect of having to deduct PAYE and national insurance contributions from freelance company's invoices after the Budget.
Chancellor Philip Hammond indicates increased taxes will be used to fund an extra £20 billion a year for the NHS by 2023, following a pledge by Prime Minister Theresa May.
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