A significant proportion of IT contactors are earning the average annual salary for IT professionals within 90 days, according to research.
According to Qdos Contactor, which gives tax advice to contractors, 40% of IT freelancers have a day rate above £500, with 8% taking home more than £700 a day.
This means they can earn the national average for full-time IT professionals – just under £45,000 – in 90 days.
Seb Maley, CEO at Qdos Contractor, said that although the top earners are a select group of highly skilled individuals, the research shows that IT can offer high incomes and flexibility.
The survey, of 711 UK contractors largely working in IT, also revealed that 12% earn between £100 and £300 a day, 20% earn between £301 and £400, and 28% earn between £401 and £500.
But Maley added: “In comparison to employment, self-employment will always bring with it added risks and less security, which in many respects counterbalances what might well be perceived as expensive day rates.”
He said the recent IR35 reform and further potential changes have left many contractors concerned over whether they will be inaccurately placed inside IR35, which would see them pay similar tax to employees without receiving the same kind of benefits.
Read more about IR35 in the IT sector
- IR35 reforms: Why the war of words between HMRC and IT contractors needs addressing.
- Stakeholders are accusing HMRC of trying to suppress their take on how the tax avoidance reforms are affecting contractors.
- Public sector stakeholders claim the late release of HMRC’s online tax status assessment tool and its supporting IR35 legislation is causing contractors to leave projects in their droves.
- IT project delays predicted at Home Office, following reports of last-minute departmental U-turn over contractors’ IR35 status classifications.
“To safeguard against this and protect the UK’s independent workforce – which contributes more than £119bn to the economy each year – it is essential that each contractor engagement is assessed individually, and by experts,” said Maley.
During the past year, Computer Weekly has received tip-offs and reports from sources about IT contractors in the public sector leaving projects after being reclassified as “inside IR35” by the public sector bodies they work for.
Receiving this classification means contractors must be taxed in the same way as permanent staff by making PAYE and national insurance contributions. They are not, however, entitled to receive paid holiday, sick pay or many of the other benefits salaried workers are often entitled to.
Read more on IT suppliers
IR35 reforms: Qdos research suggests room for improvement
IR35 private sector reforms: What IT contractors need to know
IR35 private sector reforms: HMRC reminds firms to use ‘reasonable care’ when applying new tax rules
IR35 private sector reforms: Zurich Insurance under fire over contractor blanket ban