How will IR35 affect freelance contractors

What are the pros and cons of working as a self-employed contractor?

Posted on 25th May 2021 by

If you are adventurous and entrepreneurial, working as an independent contractor could be a great way to take control of your career.

More industries are waking up to the benefits that hiring self-employed contractors brings, which means more opportunities for workers with specific skills sets across a range of industries.

Working as an independent contractor brings with it an equal number of benefits and disadvantages, so it’s down to each individual to decide if the pros outweigh the cons.

While some people like the flexibility of freelancing as an independent contractor, others prefer the stability and framework that comes with being a full-time employee.

Before you take the plunge make sure you have weighed up the pros and cons of working as an independent contractor.

freelance contractors chatting

The pros of working as a self-employed contractor

Independent contractors are often paid more per hour/day than salaried employees
There are also opportunities to save money on tax, so you take home more money than you would as a full-time employee who works at the same company.

You can focus on what interests you
You oversee which contracts you accept and can choose to only take on the projects that interest you. Be aware that this is a risky strategy, especially considering the economic downturn caused by the Coronavirus pandemic.

Increased flexibility
When working as an independent contractor, you can choose how much or how little you want to work. As you will be paid more, you can choose to work fewer hours or days to achieve the same wage as you would as a full-time employee. Likewise, if you are saving and want to boost your earnings, you can take on more work and boost your earnings.

Avoiding office politics
Unless you are a management contractor, you are unlikely to be involved in the politics that arise from office hierarchies. This means that you don’t have to put in excessive hours in order to achieve that promotion or work weekends to show your boss that you are committed.

As an independent contractor, you will be paid an hourly or day rate and you will only need to work these hours. You will also be required to work on the job you are contracted to complete and should not be expected to take on tasks that are outside of your skills set.


The cons of working as a self-employed contractor

Less security
If you struggle to find contracts, then you could experience times when you are without income, which can be very stressful. Many independent contractors have to spend time and money on marketing their services to keep a steady flow of work coming in.

Some contractors prefer to work for an umbrella company, which means they are provided work by the umbrella and the umbrella also looks after their taxes and National Insurance contributions.

Career development is your responsibility
When you’re a full-time employee, you should have the support of your managers, and training resources made available to you, to help you develop your skills and gain important certifications. Skills which can then be applied to your role to further benefit the business you work for.

While some contractors might enjoy the freedom afforded by not having a development plan, it is still important to ensure your skills are up to date, so you can still be of high value to your clients. As such, you will need to identify the gaps in your skills and knowledge and address those in your own time and at your own cost.

No paid holidays
Unlike a full-time employee, working as an independent contractor means that you won’t have paid time off for holidays. This shouldn’t mean you don’t take a holiday, after all everyone needs a break to recharge their batteries, but it will mean you need to be smart about your finances to ensure that you can afford to take holiday.

You may also need to look at your contract/s to see if you have a substitution clause in them that allows you to send a substitute in your place while you are on your break. Otherwise, you might have to wait until you are between contracts before you can take the break that you’ve worked so hard for.

You’ll need to know how to run a business
In addition to doing your job as an independent contractor, you will also have to run your own limited company business to ensure you have a continuous flow of work coming in. This might include marketing your business online or attending networking events to drum up interest in your services. You will also need to think about the administrative side of your business, including your company’s finances and the bookkeeping and managing your tax returns.

Off-payroll working legislation (IR35)
Probably the biggest reform to affect private sector contractors is the off-payroll working legislation (aka IR35) that was enforced on 6 April 2021.

Where a contractor once had the autonomy to determine his or her contract as being outside IR35, that responsibility now falls to the hiring party (unless you work for a small company). This key change in the way contractors work has seen many contractor employees forced to work inside IR35, or even had their current contracts terminated and then told they must go onto the company’s payroll instead.

There are many different facets to the private sector off-payroll working legislation, which can be confusing and stressful, and there are many online opinions about IR35 and contracting.


At Caunce O’Hara we have created an IR35 Hub to help contractors to navigate their way successfully through the private sector reform. Visit our IR35 Hub and look out for our Contractor’s Guide to IR35, which is free to download, and has been written to make the off-payroll legislation clearer to understand for all parties concerned.


Working as a freelance contractor employee isn’t right for everyone, but there are huge opportunities for those who are entrepreneurial and love a challenge. If you’re thinking about switching to contract work, it’s important to ensure you have adequate insurance cover, including contractor’s professional indemnity insurance.


Click here for a quick online quote for your contractor insurance

Or call us on 0333 321 1403 to start building your insurance policy


Pros and cons of being a contractor

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Author Phil Ainley, Marketing Manager