Well done for getting this out there. I contracted in the UK for over 30 years and will share my experiences as they’re different to yours in a few places. I’m also well versed in IR35.
1. Job security - you’re absolutely right. In my time I had 3 contracts that lasted longer than 6 years and I left 2 of them
2. Rates - you can earn north of £1000 a day with the right skills but there’s a big difference between inside and outside. Inside needs to be much higher to compensate for the additional tax.
3. Most contractors do 6 week to 6 month contracts - see above. And if you pitch your CV to me with a string of 6 month contracts I’ll assume you weren’t extended and look for reasons
4. All the stuff about choosing your hours, holidays, not being on call is not true. As a contractor your job is to fit in with the team and help them to deliver. If you’re swanning in at 10 when perms have to be in at 9 or going off in a long weekend when there’s a deadline looming you’ll be toast pretty quickly.
5. Mortgages - you usually just need 3 years accounts but some offer less but higher rates
6. Tax arrangements - don’t get sucked into schemes that offer you low single digit tax - HMRC will make your life hell. Stay above board and hire an accountant.
7. Insurance - I never had - complete waste of money. I know in some cases you may be forced to.
On 7, with personal insurance (say for phones, devices, car hire, etc) and my experiences of insurance companies trying anything to avoid pay out I have always been skeptical if business insurance would ever actually pay out.
This is good entry level stuff. As a contractor in the UK exclusively for the past 20 years tho, it doesn't paint a very full picture.
The most inaccurate bit is day rates. They're underestimated by quite some way in my experience.
What I would say is contracting in the UK is a game with different layers. This is the basic "coder for hire" layer. There's levels above that, with contracts spanning 10 years+ and higher day rates, but it is much more like dark magic.
Without a doubt, most people I know in this business optimize for networking and communication. The actual coding is done by eastern europeans and indians. Technical knowledge is more commodifiable than relations.
I was a software contractor in Seattle for 13+ years, pretty much all of this holds true for that area as well, and I assume most of the U.S. at least.
> If you turn up and are rubbish, your contract will be terminated really quick. And if there are layoffs, contractors would (sometimes) already be well gone already.
This is one piece of advice I haven't found to be the case.
I have told the following lies as a contractor: "Sure, I know PHP", "Sure, I know Ruby", "Sure, I know Python".
The reality is that most of the time you're working on the shit that no employees at the company want to do, so no one is paying the least attention to you. Yes, you have to deliver functioning code on time, but you can get away with tap-dancing for a while until you learn the stack you're working on. In 13 years, I was never fired, and usually got my next clients via positive referrals.
The above explains why this statement IS true:
> You are always seeing new companies, new tech, new tech stacks, and the job never gets boring
That was the best thing about contracting: variety. Also the worst thing. I got about 3-6 months of experience on dozens of different technologies, but never mastered anything except the skill of learning skills quickly.
But in my experience, if you only worked on things for which you were already hot shit, you wouldn't get that level of variety, and you probably wouldn't get enough contracts to sustain a business. People do specialize, but the tendency in contracting is always to be a generalist because you have more options.
The two biggest skills in contracting are communication and faking confidence. They are paying you to deliver something, but really they're paying you to happily accept some of the stress they feel. If you practice saying "That shouldn't be hard, let me handle it" you are well on your way to being a success.
25 years ago or so, I got a contract doing Word Basic to update a bunch of code to maintain an ISO 9001 handbook using MS Help files. I had.no experience with any of those things. But as you say, you get the tasks nobody internally want, so I learned all of them, and still finished the work faster than the client expected and was hired back for another project later.
I also had a brief contract to teach Excel where I stayed a chapter ahead of my students in class, and similarly got great feedback...
So much contract work has a really low bar.
But then on the other side of the difficulty, I also delivered a library to provide a reliable data transfer layer on top of GSM data for use between two ships in motion (just adding some retries and automated redial etc. the only hard-ish part was minimizing the time to catch up after a redial where you might be suddenly lagging 40+ seconds behind), one of which was tracking an unmanned submersible. That certainly involved taking in their stress - they were demoing the system for US Navy brass, and my part was what'd relay the demo data from the tracking ship to the workstation they'd show it on, and it was clear a large part of the pay was so there was someone to shift blame to if needed (thankfully everything went smoothly).
But that variety was fun. I much preferred the short contracts like that - didn't appreciate the stress of finding new ones which came with the short projects though.
It's depressing to see that the average day rate in London is still at around 500 pounds. I made as much in my first contract 7 years ago. Sky was offering 650 pounds a day for your average frontend react role.
I thought the times were good, but even then the old timers were talking about the good old days with some nostalgia.
I'm out of the game (Even out of the UK) but I work for a British company, with about 30 contractors on board. We're starting to wind the project down, and I think there's a genuine sense of fear that the market has considerably dried up.
It has. Unless you are willing to take a reduced rate, there’s not a lot out there. I’m just about to go perm again after 6 years contracting because I’ll be better off !
I've been contracting for many years now. It's a good writeup, but as the top comment mentions - these are the basics. There is a lot of nuance. I'm exclusively Outside-IR35, and since this was rolled out to the private sector it dried up a lot of work as companies were spooked for no reason about this. There is still work out there but the market is not as good as it was a year ago. The rates mentioned in this article are 'bad market rates'. Good market rates are higher.
I've seen some mention Inside-IR35 - there is a catch there. If you've done outside work, and then go inside, your tax gets bundled up and you can potentially end up paying top rate from the get-go, or finding your self with a higher tax burden than you expected. Talk to your accountant about that if you're planning to take on Inside gigs or a mix of both. I'd avoid umbrellas at all costs.
Mixing inside and outside contracts can be quite tax efficient but requires being diligent. For example, an inside IR35 contract that partially spans two tax years can be used to take the "reasonably cheap" first 50k of salary of each year, with any extra put in a SIPP. Then, outside contracts in the same tax years are used just to accumulate money in a limited company with a view to withdraw funds via BADR at some point, and potentially used to top up the SIPP as well.
Interesting approach. My personal case is more complicated but this is still interesting. As an aside, my accountant raises a point that mixing might raise some flags with HMRC regarding status.
Working with a different statuses for the same client should definitely be avoided as HMRC will be sceptical that the working practices are actually different between contracts. Working differnent statuses for different clients shouldn't be an issue IMHO
I did this a bunch in another country for a few years, then moved to the UK and did contracting through a limited company for a few years.
But now, I've switched to a perm role and I'm enjoying it a lot more. There's a lot less admin and tax stuff I need to deal with - I can focus fully on being a developer - plus I'm working on more fulfilling projects over longer periods, and making longer-term plans.
Technically I guess I could be earning more cash, but that came at the cost of time and stress that I just don't worry about any more. I'd much rather be happy.
The problem is that house prices in this country are so damn high, I personally have to think more about maximising money income than about doing a job I’d enjoy
I can literally buy a castle in France for what my 3 bedroom house in London costs. Not a huge one, sure, but an actual, real castle. OK, so France has ridiculous numbers of them, but anyway.
Sure, it's expensive everywhere, and there are plenty of places in France too where the prices are UK level (I'd like to retire to the South of France, and e.g. Nice is near or even above London levels for some areas, and buying a house there also costs castle money if you want something central) and same for elsewhere in Europe, but UK house price growth has been something else.
Sorry but that's relatively useless cherry picking. Wages and work opportunities in remote parts of France (and other such parts of southern Europe) are also much lower than in the expensive parts London, at least in tech, not counting minimum wage jobs.
There's a reason London is popular for skilled immigration and why that makes it so expensive, and it's not all speculation and wealthy petro/oligarch money. Same reason why Google, Meta, DeepMind, NovoNordisk, etc have offices there instead of in a nice castle in France.
Try looking at housing prices in Nice or Cannes and you'll see London prices with Southern-Europe wages. Same in nice parts of Austria near the Alps. At least in UK you can earn well in tech to actually buy a house close to the capital.
UK can also be cheap if you go up north around Scotland or above, but there's probably a reason why you chose to live in London and not in the north of Scotland and that's probably pay and opportunities, hence your higher house prices.
> Sorry but that's relatively useless cherry picking.
It was picked a bit tongue in cheek because I happen to know the price levels, and because the difference is so ridiculous.
Yes, I can get a bigger property elsewhere in the UK too but nowhere near the size difference. I've looked. 3x my current property is "easy" within the UK at similar prices in places - even "in the middle of nowhere" - that I'd be willing to consider. In France moving to the same level of "middle of nowhere" can get you anywhere from 5x-10x the size, and tens of thousands of square meters of land for the same price.
It'd be weird if there wasn't a price differential given the lower population density, and as you've pointed out salary differences. The price pressure is far lower.
> Wages and work opportunities in remote parts of France (and other such parts of southern Europe) are also much lower than in the expensive parts London, at least in tech, not counting minimum wage jobs.
And the same is true for the rest of the UK too - remember that before Brexit the UK had several of the poorer regions of the EU, large net recipients of EU development funds. Cornwall for example faced a massive income shortfall due to the loss of EU funds. Someone once suggested that the UK consists of a wealthy city-state surrounded by one of Europes poorer countries. France has a large differences too, but my impression at least is that it is not nearly as pronounced - I may be wrong (I am aware that France certainly has plenty lower income cities too).
And overall, France's PPP adjusted income averages compare as favorably as it does with the UK in part because housing costs in France have grown far slower than in the UK over a period of decades.
> Try looking at housing prices in Nice or Cannes
I literally named Nice and pointed this out. I keep a close tab on Nice as I plan on retiring somewhere in the region. Incidentally my "castle" quip is because I somewhat jokingly decided to look up what I could get as a "getaway" a bit more remote if I downgraded my demands for Nice a bit, and the answer is I can likely afford a well-renovated castle (fairly far away, certainly - there are not many castles in Provence in my price range). Doesn't mean I'll buy one, but I found it funny.
There is nowhere in the UK where I'd be able to afford something similar (even discounting the horrific weather) even as my sole property - job market entirely aside.
But while prices in Nice and Cannes are London level, these are also tiny little villages - I've walked across the town of Nice in "every" direction, because I like walking - it's only about twice the size of my single London borough. The time it takes me to get to the centre of London is about the same time it'd take you to get to, say, Cannes or Ventimiglia from Nice, or deep into the smaller surrounding villages. And I know plenty of villages within similar travel distance that are great at 1/3 of the cost of similar properties where I live.
To get similar prices in the UK I'd need to move somewhere far more remote, and nowhere I'd want to consider living.
> There's a reason London is popular for skilled immigration and why that makes it so expensive, and it's not all speculation and wealthy petro/oligarch money. Same reason why Google, Meta, DeepMind, NovoNordisk, etc have offices there instead of in a nice castle in France.
That's true. That does not change the fact the prices are massively different. It explains why prices in London are the way they are. I'm not arguing the reasons. I'm not even arguing it's all that much cheaper for locals, though the PPP adjusted disposable income for France does suggest it would be.
> UK can also be cheap if you go up north around Scotland or above, but there's probably a reason why you chose to live in London
Yes, family commitments. I wouldn't live here otherwise. London is great when you're young, and/or like doing lots of stuff. I was over "doing London" ~15 years ago. I have no need to live in London to earn what I do in the job I do.
If you’re going to work inside, just use an umbrella. The margin they take is minimal and they make life so much easier.
If you’re going to run a limited company, you have to actually run a limited company. There are horror stories on the contractor forums where HMRC have taken a dim view of contractors whose companies are essentially run by their accountants. I can’t remember what the term associated with it is but definitely an area to be careful with.
The horror stories are from contractors who have attempted to cheat the tax system by eg making loans from their limited companies that they never intended to pay back, or who claim company expenses for personal benefit.
You can stay well within the tax code and avoid any grey areas, and will still get more income by operating as a limited company. Yes running a limited company requires some admin work, learning about the tax system but a few of hours admin a month is well worth the extra £20k net income (or whatever the figure happens to be)
> The horror stories are from contractors who have attempted to cheat the tax system
Some are, certainly. Many are not.
The example I gave is people who setup a limited company in order to take on work as a contractor. They've gone to an accountancy firm who've told them we'll do all the work for you. HMRC have then turned around and said that the company is a sham. Again, I can't remember the name of that particular problem but it's well known on a popular UK contracting forum.
The deeper you dig into IR35, the murkier it becomes. Contracts are dismissed for instance and it's actual working practices that are reviewed. There are absurd rules around control which are far too vague and subject to opinion that it could easily be argued either way.
With a limited company generating £100k/year in revenue, I’m curious how much a contractor would earn after salary tax? (assuming no admin/accounting costs)
Put it through a limited company and you’ll pay a lot less than as salary (and PAYE). It’s a weird quirk, but it’s about half the tax roughly. Means you’ll net about £80k minus some small costs. It’s been some years since I did this but an accountant can advise you and help you deal with any national insurance payments need to be dealt with.
With Ltd, on 100,000 the optimum approach is a PAYE salary of about 12500, which will incur about a 500 NI charge to the company. You then pay corporaton tax on the 87000 of 21750 leaving 65250. If you pay the 65250 as dividend, you'll incur 12500 in dividend tax.
So in total from revenue of 100000 you end up with 12500 (Sal) + 65250 (Div) -12500 (div tax) = 65260. Not better than PAYE.
Of course, the better approach might be to extract only 37500 dividends with a 3200 tax. The company keeps the 27760 residual and one day in the future you may be able to close the company and incur just 10% tax or £2776. This way you'd take home 71750.
Still better, you might choose for the employer to put money in a pension. Here, you could put 40000 in a pension, company profit now 47000 before 9000 tax. Pay the 38000 out as dividend with 3600 tax. You end up with 12500+38000-3600 = ~48000 plus a 40000 pension to be taxed at withdrawal (lets assume 20% so 8000) for about 23000, or 80k. This is the only way to approximate your 80k but a PAYE person could do exactly the same (with a friendly employer) for pension relief.
And the above is all outside IR35. It's worse inside.
The real reason Ltd is more profitable is based on all the hidden expenses of an employer. Rather than 30%+ of the customer fee going to employer expenses before they pay you a smaller salary, they now go to you as a business owner who can do much better than 30% business expenses (close to 0). You're trading that for paid time off, job "security", not chasing leads, etc.
There are a variety of situations where you can end up paying more tax working through a Ltd now. Just on naive marginal rates comparing income tax + employee NI with corp tax + dividend tax on the remainder you'll be looking (once the changes announced in the Budget come into force in April) at 28% PAYE vs. 26% Ltd for basic rate taxpayers but 42% PAYE vs. 46% Ltd for higher rate.
The Ltd rates can also increase noticeably if your revenues increase and your corp tax rate starts sliding up from 19% all the way to 25% (and that's not a marginal rate - your entire profit gets taxed at the increasing rate as you make more).
Of course as an employee you also get huge advantages like paid time off, employer pension contributions, a degree of automatic job security, and not having to file the paperwork and pay the fees for running an entire company. And via a Ltd you have a lot more flexibility to control both how and when you pay out your post-tax revenues that can sometimes be valuable. So it's never really an apples to apples comparison and there's always a lot that depends on your specific circumstances.
If the company earns £100k/yr, what matters is what you, the individual, actually end up with.
Corporation tax will take you down to ~£80ish but you still need to draw the money out of the company.
Most people will take a small amount as a salary through PAYE to use up their tax free allowances and get the NI stamp. The rest is then paid as dividends.
Spent many years contracting within the UK market but living abroad.
After emigrating from the UK, I moved around in the EU (GMT+1/+2). It was the best of both worlds since IR35 cannot apply to non UK domiciled tax residents.
Rates around £450-500 per day for that I was doing. Finally settled in an EU country and then moved to a permanent role after twenty plus years of being a remote contracting bum.
Well, doing what, for whom and through which years approximately.
Also anything in your marketing apart of the basics, which is portfolio, referrals etc?
Mostly .NET for corporates sticking to banking, finance, insurance and energy. Familiar industries always helped me to hit the ground running and I got a great reputation for it.
Started off working via recruiters but then just word of mouth. Ex colleagues would recommend me and they would move around. I’ve always been a good networker.
I recently switched back to a “proper job” in a company who’s goals align with mine. Now climbing the “corporate ladder” so to speak.
You mention you get to learn new skills and technologies; but if they only want to hire people who can immediately do what they need, how does that happen?
Does it involve a bit of stretching your experience?
Clients often just ask if you can do X in Y time and Y is often more than large enough to learn X because often the estimates are set by full timers who really want to make sure they are not burdened by it.
I have said yes to being able to deliver projects in languages I'd never even seen before, because the timeline was long enough that I was (rightfully) confident I could figure it out within the estimated time.
Often they just want to outsource uncertainty. Of course you then do need to take on the risk and make sure you deliver, or you won't get hired back and if it's a referral it can get ugly, but in the years I did contracting that was never an issue.
I'm a UK contractor and I'd say I've learnt lots of new skills and tech in my periphery while on Ruby on Rails and database contracts.
In the last few years I've been exposed to enough Kubernetes, Terraform, Docker, Azure, Google Cloud, Dataform and BigQuery to feel comfortable putting them on CV.
Microsoft Dynamics and SharePoint too but I don't think I could face any more.
That looks low to me but at least the openly advertised rates do seem to have taken a hit since COVID and the recent IR35 mess. Both caused a rapid and industry-wide shock that seems to have overcome the upward pressure on rates (at least for the good people) that would exist in a normal competitive market.
UAE has the advantage of being tax-free too, which adds ann extra 30%ish to take-home, although many people work very long hours. Also the weather is phenomenal 8 months of the year (although unliveable the rest), and your employer is on the hook to pay for exceptional health insurance. For a professional couple without kids, it can be a great way to save money, although costs are comparable to London.
I was doing well living there and doing contract work out of US EST.
> If you look like an employee, regardless of the legal layout, you'll be remunerated like one.
This just isn’t true. I’m currently with a FTSE100 financial institution and inside IR35 contractors make way more than perms at the same level of experience. They just don’t want headcount on their books, and still have work that needs doing, and they will pay to get it done.
The problem is job security at the moment.
If you don’t look like an employee, you’ll not get treated like one…
> Be a business. They make more money.
Completely agree, but most business owners make money by exploiting someone else’s labour.
I’m currently with a FTSE100 financial institution and inside IR35 contractors make way more than perms at the same level of experience.
That may be true but it's partly because financial services companies are infamous for not paying their PAYE developers very well and having very bad working conditions. Most people who can get £750+ assignment rates via an umbrella company in the financial sector weren't going to be making sub-£100k on salary in an open market either.
Absolutely agree. If you’re willing to maximise your pension savings, inside IR35 work with a higher day rate is usually more lucrative overall, even though you have to pay tax the normal way (gasp!).
Also, being on PAYE through an umbrella is less admin, no worries about HMRC, and lower overheads compared to Ltd - no accountants, business bank account, xero/sage (if you’re a DIYer), insurances, etc.
I found the yearly take home for outside IR35 contracts is around 220 * day rate, inside is 200. I did find recently that the contract rates have gone down a lot, and the full time salaries increased - so I'm back perm after about 8 years, and am better off having done so. I found jobserve.co.uk good for contract roles though
The benefit really depends on the rate. When you get near the 1000/day range outside becomes far more lucrative than inside due to the flexibility it gives you for tax planning, as you can defer personal income to a future date where it can be taken in a more tax-favourable way (eg via SIPP or BADR).
I would recommend Crunch's webapp accountancy software (which I used a lot) but also hire someone to handle it for you (which I did not and wish I did).
Remember, with GPT-4 around its alot easier to work with a language or technology you only have minimal exposure to. It's like having a Principal Engineer around 24/7 that you can ask questions to unblock you. So dive right in. You can also use it to practice the interview before the actual interview.
I believe only not-so-strong developers actually believe this, after actual experience with this tech. That's just like saying that "Stackoverflow is like having a Principal Engineer around 24/7" which could be true to a degree, but it still doesn't make up for not knowing stuff.
This tells me that you haven't used GPT-4 (Thats not the free ChatGPT), or have not learned how to prompt properly. You can't ask Stack Overflow follow up questions. If the code from stack overflow does not work in the way you expect it to or the answer is not 100% accurate, you can't ask Stack Overflow to correct it.
Also, its better in the hands of Senior Engineers who can evaluate answers for correctness, because just like Google/Stack overflow, it can be wrong.
My experience with GPT-4 is that it's been amazing for python and mediocre at DAX. It frequently hallucinates functions, gives code that can't run, or does not fit the prompt.
It is still helpful, but there's a big gap between how helpful it is, depending on the tech.
It's more like having an overeager intern around 24/7. Good at spitting back documentation at me or finding something from Stack Overflow, but really struggles with much else.
Ise use ChatGPT and Copilot all day, they're incredible useful! But let's not overstate their power.
I don't use copilot so can't vouch for its accuracy but I have heard it produces code with security holes a large percentage of the time. I do use GPT-4. ChatGPT (GPT 3.5) is not that great. GPT-4 blows it out of the water. Let's take SQL as an example.
As a software engineer/founder, I've used it to write all kinds of advanced queries for Tunnelmole that get all kinds of metrics which previously would have require a Data team. You can write a prompt like "here is my table structure, give me a query to get my abandoned cart rate".
If I ever hire engineers for my project, prompting is a skill I'll be looking for.
The idea that LLMs like GPT-4 are glorified stochastic parrots who are merely predicting the next word has been thoroughly debunked, almost no one in the field believes that anymore. Whats been proven so far is they actually understand your questions and their responses. Its also proven that they have some level of reasoning capabilities.
I highly recommend using it. Think of it as a Google replacement. Every engineer out there uses Google. Instead of spending hours on Google, you can spend a minute or two doing something new with the help of an LLM. They can be wrong, which is why they are better used in the hands of Senior Engineers.
Nah, their text classification is better then their text generation.
Just let it do something novel instead of something typical stack overflow.
Eg. Nest, a c# library for elastic search, is something it has consistent troubles with because it's not with "and" or "or", but should, must and filter.
But yeah, you won't get into those cases as a junior or doing typical stuff it has been trained on :)
If the person writing the questions is a Senior Engineer already and knows how to evaluate the answers properly for correctness, you probably would not be able to tell, even if they've only had minimal exposure to let's say, Ruby or Python as opposed to JavaScript/TypeScript. Or writing advanced SQL queries when they don't do this very often.
Most engineers will come across something they haven't used before in most roles. Perhaps some legacy system in some dying language, for example. Previously, they might have spent hours on Google. Now, GPT-4 can unblock them in seconds.
It cant replace the mindset of a human, but what I'm basically saying here is with GPT-4 and good prompting skills, you can be alot more brave when it comes to new unfamiliar tech. That's an advantage in a fast changing tech landscape.
GPT-4 doesn't work for legacy systems in dying languages. It only "works" for things that are well-documented on the internet, or described in what books were included in the dataset.
I can't think of a situation where you'd go from spending hours on Google to being unblocked in seconds. If you're spending hours on Google, then your first dozen search queries aren't turning up the information – in which case, GPT-4 wouldn't turn up the information immediately, either! (It would say something, but it's unlikely to be based on a true story.)
1. Job security - you’re absolutely right. In my time I had 3 contracts that lasted longer than 6 years and I left 2 of them
2. Rates - you can earn north of £1000 a day with the right skills but there’s a big difference between inside and outside. Inside needs to be much higher to compensate for the additional tax.
3. Most contractors do 6 week to 6 month contracts - see above. And if you pitch your CV to me with a string of 6 month contracts I’ll assume you weren’t extended and look for reasons
4. All the stuff about choosing your hours, holidays, not being on call is not true. As a contractor your job is to fit in with the team and help them to deliver. If you’re swanning in at 10 when perms have to be in at 9 or going off in a long weekend when there’s a deadline looming you’ll be toast pretty quickly.
5. Mortgages - you usually just need 3 years accounts but some offer less but higher rates
6. Tax arrangements - don’t get sucked into schemes that offer you low single digit tax - HMRC will make your life hell. Stay above board and hire an accountant.
7. Insurance - I never had - complete waste of money. I know in some cases you may be forced to.