A record number of people will start their own business this year in the face of rising unemployment, an industry group has predicted.

The Federation of Small Businesses (FSB) said 300,000 people will become their own boss, helping to create new jobs, as well as boosting the economy.

However, the business group voiced concern that workers becoming self-employed might be "pushed" into paying PAYE tax if they were contracted to work for another company for any length of time.

FSB chairman John Walker said: "Those who do become self-employed need to beware of the tax man, who is penalising these people when they work for other companies, putting them in the PAYE bucket, and turning their legal status from self-employed to an employee."

Mr Walker called on HM Revenue & Customs to respect people's wishes to be self-employed, and not to push people into the PAYE net.

A Business Department spokesman said its priorities are to build an internationally competitive skills base and to support people get into the workplace.

"We have already created 50,000 new apprenticeship places, and are bringing in a new integrated careers advice service, as well as asking universities to provide information about employability prospects of the degrees they are studying," he said.