The Hungarian Authentic a.k.a Humble, Unique, Authentic

Contracting in the United Kingdom in 2023

Contracting in the United Kingdom in 2023

A comprehensive guide about contracting in the UK with experiences

As many EU citizens, I also left the UK after the Brexit referendum and I felt lucky, I got a chance to work in Germany. Four years after I left England, in 2022, I returned. In this post I am sharing why I left England and why it is financially no longer rewarding to work here as a contractor software engineer. This info may come useful if you plan to work in the UK or you already work here and you want to start contracting.

For those, who do not know me, I work in the IT industry for 16 years. Since 2016 I work as a contractor. In the first 3 years I worked through my UK Limited company (only in the UK), which was managed by my accountant. At that time, it was  financially a good decision to leave my permanent job. In my last full time job I earned £44.000/year + overtime, total about £60.000/year and paid about 42% tax.

As a contractor, my annual income increased to £110.000 and paid 22% tax after the profit in the company and further 15% tax after the salary I gave myself. Paid a further £2.200 a year for my accountant. I did not have to do any more overtime, on-call, I enjoyed the flexibility that comes with this lifestyle. I contributed into my own private pension pocket and paid insurances. At that time I felt, the government compensated with the generous tax rates that I get no benefits and every 6 or 12 months I have to go through a rigorous interview and on-boarding process.   

Just before Brexit completed, we left the UK in 2018-2019, in stages. I thought we will never come back. I heard about the new tax reforms announced, about the new IR35 rules and they did not sound attractive to a freelancer any more. You can ask, why we came back then. I must admit, because it was the easiest to get a contract here with my references.

Inside IR35 in simple term means, the service you provide is more an employment than self-employment in the eyes of HMRC. You are expected to pay the same amount of tax and national insurance that a permanent employee would pay. If you work in the same team where your permanent employed colleagues, in the same office time, you have the same duties and responsibilities then most likely you are considered a full time employee and you have to work inside IR35. In order to avoid HMRC investigations and complications, many companies simply no longer offer outside IR35 positions. These consultants must have a formal employer (Paystream,, Giantgroup Umbrella) who deducts taxes and NI, pays the salary. Usually this employer acts as an umbrella company between the contractor and the client. You no longer need an accountant, an own limited company, you are considered like a full time employee EXCEPT you get NO benefits but paying the same percentage of taxes and contributions.

Outside IR35 in simple terms means, you can maintain legitimately the consultancy service you provide with working independently from any teams, not being subject to any supervision, direction and control. In this case you will have the responsibility of ensuring that you are paying the right amount of national insurance and tax on the money that you receive for your work. You are not subject to PAYE by your client, you still need an accountant. Very rare to find a client who offers an outside IR35 position in 2023.

An example; my taxation: in the first tax year, I paid 35% tax due to temporary tax codes I got (the final tax rate I will pay is 45%). On top of this, HMRC notified me, I owe a further £4645 that they will deduct in this current tax year. I paid weekly £116 NI contribution. You can get a detailed overview here about tax rates and allowances.


Pros: There is a huge demand for skilled, experienced IT consultants in the UK. As many consultants left the country, comparing to EU countries, it is easier to find a contract here – in my opinion. As I am employed by Paystream, I no longer need to deal with an accountant and with my company’s and my personal taxation. You can switch between contracts while your employment stays with your Umbrella. IT contractors can often demand higher daily rates than permanent employees in similar roles.  

Cons: 45% tax to be paid is something hard to “swallow”. You get 0 benefits, you are still considered in the team as a contractor (you get no access for internal trainings). You must pay your own private pension and insurances. After the end of your contract it is your responsibility to find a new one. The Government / HMRC no longer reward us for the freelancer lifestyle, appears we are even punished for living the life of a contractor and we have to pay a hefty price just to live and work here. Many contract positions offer “full remote” way of working but in reality it means, you have to live in the UK and work from the country – not much chance to live as a digital nomad.

Notify of
Inline Feedbacks
View all comments

Social media & sharing icons powered by UltimatelySocial
Would love your thoughts, please comment.x