A new study by Qdos Contractor, the leading tax advisory service for contracting professionals, has found that around 40 per cent of the IT contractors polled are able to earn the average annual salary of their permanent counterparts within three business months.

In total, one-third of the 711 UK-based contracting IT professionals surveyed reported day rates of between £501 and £700, with eight per cent commanding more than £700 per day. Those earning more than £500 per day would, if they worked five days a week on their contracts, hit the £45,000 average annual salary of their conventionally employed counterparts in just 18 weeks.

Most of the contractors polled work in IT and digital roles. Their day rates break down as follows:

  • 12 per cent earned between £100 and £300 per day.
  • 20 per cent earned between £301 and £400 per day.
  • 28 per cent earned between £401 and £500 per day.
  • One-third earned between £501 and £700 per day.
  • Eight per cent earned over £700 per day.

Commenting on the results of the survey, Qdos Contractor CEO Seb Maley said: “While these figures represent a select group of highly skilled, qualified IT contractors and not the entire freelance market, they do indicate that independent working – particularly in the IT industry – is a career choice which brings with it the opportunity to earn more and the freedom to work how and when people choose.

“In comparison to employment, self-employment will always bring with it added risks and less security, which, in many respects, counter-balances what might well be perceived as expensive day rates.”

He went on to point out that recent reforms to IR35 regulations, along with other prospective changes, have caused widespread concern among contracting professionals who fear placement within the new tax avoidance regulations. This would force them to pay higher tax on their incomes as well as National Insurance Contributions (NICs), even though they would not have any access to the statutory benefits that these taxes finance.

Recent data from the Association of Professional Staffing Companies (APSCo) revealed that 82 per cent of its member recruiters have seen an increase in the use of Umbrella Companies in the public sector as a direct consequence of the new IR35 rules – a trend that APSCo expects to continue.

While automatically paying tax income tax and NICs on a PAYE basis, complaint Umbrella Companies allow contracting professionals to continue working as flexibly as they like, sparing them, their recruiters and their public sector end clients the stress of potential investigations should HMRC deem their personal service company contracts as inside IR35.


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