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.
yeah if you work for a bank and have some rare skill, plus knowledge of finance + expereince in the field.
The rest of us get 4-500£ / day, like the OP mentions
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.
Number two skill is negotiating.
The technical stuff starts much further down the list.
> 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.
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.
Spits out coffee. Beautiful. If you made that you deserve a prize.
I thought the times were good, but even then the old timers were talking about the good old days with some nostalgia.
UK labour market is dire. UK GDP growth is stagnant and border line non-existant
Eg https://www.itjobswatch.co.uk/contracts/london/software%20en...
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.
Tell me a developed western country where that's not the same.
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.
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)
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.
Under PAYE, you'd take home 68500
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.
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.
Your take home pay on £100k would be roughly £67k
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.
If you have questions then ask away.
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.
It’s where I spent most of my contracting life.
Does it involve a bit of stretching your experience?
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.
Knowing your limits is important, of course.
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.
If you’re smart, you’ll pick it up on the job or read a little about it before the interview.
Yikes, really? In that case they’re unchanged in the last 12-15 years.
Perhaps inside IR35 and perhaps for a low rate. Big corps mostly do umbrellas these days.
Businesses either hire contractors for a liquid and expendable workforce...
Or they hire high skill people who take on more liability and charge for it accordingly.
Be in the second group. They don't use umbrella setups.
£220/day?!
I've not paid a developer less than 600/day since like 2015 and that is outside London too.
Some people are being taken for mugs.
This comparison is more true than a lot of devs want to admit.
You can be a plumber or a safe cracker. A person who does, or a person that knows.
The latter pays better day rates.
This really doesn't hold for many cases, and especially for the rates mentioned in this article.
Are there any somewhat reliable sites that show median and other percentile contract rates? Something like levels.fyi but for contracting rates?
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.
Ise use ChatGPT and Copilot all day, they're incredible useful! But let's not overstate their power.
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.
If you would do new things, it won't be able to help you.
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.
Your comment is an advanced version of "fake it till you make it". That's another red flag when I'm hiring disgustingly highly paid consultants.
