Record breaking increase in the number of new contractors

Record breaking increase in the number of new contractors

My research has revealed a record breaking increase in the number of new contractors/ limited company formations, which supports the theory of a new entrepreneurial culture developing to partly replace the traditional employment culture, as a result of the economic crisis.

Many jobs are being shed by the civil service and local government, with quangos being particularly hit hard. The government have stated their expectation that the private sector will replace a lot of the jobs and functions hitherto carried out by the public sector.

According to the Management Consultancies Association which represents 70% of the industry in the UK, member organisations have already seen a significant fall in public sector work, with most expecting to drop further in the remaining part of the year.

An increasing number of consultants are setting themselves up with their own business to position themselves to take advantage of the new way of doing business in the UK. Their client Organisations are increasingly looking to become more flexible, preferring to outsource and sub-contract rather than employ permanent staff, with all of the financial and legal risk that traditional employment involves.

An increasing number of Agencies are in the marketplace to provide an important link between the client organisations and the contractors and consultants who can fill the required roles.

In my experience, the hourly rates achievable by independent contractors are nearly always significantly higher than what the consultant would be likely to expect if they were employed by the same business.

In nearly every case, it is best to form a limited company and take a small salary and high dividends to maximise take-home remuneration. It is now possible to set up a limited company in a matter of hours and set up a business bank account within a week. Also, with the advent of online VAT registration, it is now possible to register within a few weeks.

By registering for the VAT Flat Rate Scheme (FRS) and maximising claims from their company for allowable business expenses, consultants can optimise their take home remuneration by operating through their own limited company.

All good accountants will be able to explain in simple terms the benefits and the ease of working through your own company. For more information visit: or please don’t hesitate to call 0800 8 40 40 14 or email:


By graeme on May 3, 2011

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