Private citizens making small payments to other private citizens for work/service/products should not have to contend with the full burden of employment and taxation law. In fact I beleive they should not have to contend with any law whatsoever.
Any citizen should be able to pay up to (say) £30 a week to another private citizen with no strings attached. Any citizen should be able to receive such payments from a number of citizens up to a total of (say) £100 a week with no strings attached.
People wanting to offer small services like hairdressing, gardening-labour or selling small items would be allowed to do so off their own bat with no further ado. People at the bottom end of the economy could get started in making a living honestly, honourably and legitimately with minimum of fuss - no tax, no payroll no overheads.
The UK has to urgently create many jobs for people who have been workless for a long time, and create opportunities in the private sector for large number of public sector employees who will are likely to find their current jobs cut as part of the deficit reduction programme.
Once we are again a nation of workers, there will be ample opportunity for people moving up to make their contribution to taxes etc. But the priority now is to get people in to the working habit and to reduce their dependence on the taxpayer.
Small business is the only way to create jobs quickly - we need to get moving - and we can't start too soon.