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5 reasons why it makes sense to be a contractor in the UK

by Kobus Van den Bergh | Dec 05, 2016
  • There are a whole host of benefits to being a contractor in the UK. The most obvious being that, when operating as a limited company, you stand to make substantial tax savings compared to normal employees. Below are a few reasons why we think the UK continues to be a great place to work as a contractor.
    canary wharf

    There is still strong demand for contractors in the UK

    One clear positive is that the private sector in the UK is continuing to grow and employ contractors.

    As economic growth continues, demand will stay resilient as big corporates (and certain industries, especially IT) take preference to hiring contractors over permanent employees.

    As a result, UK contractors can look forward to earning well while making use of limited company structures.

    Form a limited company, enjoy some of the lowest tax rates in the developed world

    As a contractor in the UK, forming and working through a limited company means that your profits will be taxed at a reasonable 20%.

    The government recently committed to lowering this to 19% in 2017 and 17% in 2020. That’s a significant saving on your tax bill.

    To put this in perspective, France charges 33.3% on corporate profits, Germany 30.175% and the United States a whopping 39.1%.

    Dividend taxes are set to remain where they are

    For the foreseeable future, the basic rate for dividend tax will remain at 7.5%. The higher rate of 32.5% and the additional rate of 38.1% will also remain unchanged.

    Dividends thus remain an efficient earnings mechanism within the basic rate band.

    Construction and engineering are about to get a shot in the arm

    The recent Autumn Statement had two pieces of particularly good news for contractors working in the civil engineering and construction industries.

    The government has set aside £2,5 billion pounds in housing funds for the construction of new homes. This will provide job opportunities for a variety of contractors who ply their trade in the home-building industry.

    Also on the cards is a £23 billion outlay for infrastructure. The government has put this massive investment fund together in order to upgrade infrastructure around the country that is beginning to creak. This means that civil engineering contractors are likely to see some promising opportunities arise out of this government-driven plan.

    Personal allowance increase

    The personal allowance is the amount of income that tax payers in the UK don’t have to pay tax on. In a move that will be welcomed by most UK contractors, the personal allowance has been bumped up from £11,000 to £11,500. This change comes into effect on 1 April 2017.

    We’ve been helping UK contractors for over 20 years. If you have any questions about tax, your Self-Assessment return, or limited company formation, give us a call on +44 (0) 20 7759 7553. Alternatively, you can email us at

    We are a professional services company that specialises in cross-border financial and immigration advice and solutions.

    Our teams in the UK, South Africa and Australia can ensure that when you decide to move overseas, invest offshore or expand your business internationally, you’ll do so with the backing of experienced local experts.

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