IT contractors have been warned against comparing their own salaries directly to company employees undertaking similar tasks.

Those that do could be significantly undervaluing their worth and leaving themselves out of pocket, according to Contractor Calculator.

IT contractors have to pay their own National Insurance Contributions, income tax and corporation tax themselves, so the rates of pay achieved by employees and contractors are not comparable, it claims.

However, Contractor Calculator suggests that by operating as their own limited company, an IT contractor can pay their tax efficiently, with a low salary yet high dividends.

"The effect is that you pay less tax than an employee, which is your reward for taking the risk of being in business, rather than being employed," the website concludes.

A new iPhone application, the UK Tax Wizard, could help IT contractors to more accurately work out their complex tax and National Insurance liabilities, according to TechRadar.com.