The easy answer to this question is yes, Contractors earn more money than employees. There are many factors as to why this is the case, but the two main contributing factors are paying less in tax and offsetting expenses.

As an employee not only do you suffer higher tax but also the employer suffers national insurance costs. Currently, an employer paying a salary of £35k per annum would actually spend £38,744.

If an employer was to offer a contractor £38,744 you would have the opportunity of setting up a limited company or using another solution to ensure a high net return, achieving a net return of anything up to 82%. Tax advantages are available in many ways, for more information please contact Castlemaine Associates for an expert opinion on how you can achieve the most for your money.

Along with the tax savings there are other benefits. Any expenses that are wholly and exclusively due to the nature of your work can be offset, again achieving a saving that is not available to employees.

Other options available to only contractors are the ability to re-claim your VAT via your limited company, if you have purchased a laptop for £1500, you would be able to make a VAT claim for £223.40, meaning the laptop only actually cost you £1276.60.

So the evidence is clear, Contractors quite simply earn more than employees.