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Comment by CommanderData | Hacker News Reader

The United Kingdom like others are in a race to the bottom in terms of wages.

Contractor and Perm salaries in the tech sector to me are a good representative of the situation overall. Wages in these areas have stayed roughly the same because there's an illusion that they are already paid too much (5-10%+ over 3 years). Inflation + the race down make the UK job hunt seem less and less appealing to the extent I know a few people who've packed up and gone across the pond to Europe. The skills shortage is only going to get worse with an already stretched and dwindling pool of people and there is no sign of let off to undermine wages yet, and this is just in London.

The situation of pay falling despite a shortage of workers is bizarre but we can't forget the efforts to undermine and keep wages low.

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Actually salaries have increased significantly in the past 2 years. A senior dev can easily learn up to 120-130K pa.

If thats enough to buy you the lifestyle of an office worker in Berlin or Rome, I don’t know. The real issue is cost of property and childcare, especially if you have a child, because you can’t live in a cramped 60sqm apartment nor you can spend 4 hours a day commuting. You can easily end up spending 6K a month just to put a roof over your head and send you child to nursery. 6K per month is ~120K gross.

In Berlin you get nowhere near the 120-130k as a senior dev, at least not on average. There may be some (very rare) exceptions.

I wasn’t referring to the gross salary, but to the lifestyle you get from it.

Living in a 80-90sqm flat without carpet or broken stuff, in an area where you have bars and cafes and restaurants and a decent school, plus sending a child to nursery, doesn’t seem unattainable in Germany (at least my German friends say so). In London that’s luxury.

I was under the impression that tech contracting work was effectively neutered by the government with legislation that made it nearly impossible to do.

Back in the good days you could earn 800 pounds day rates, which is a very good salary by UK standards. Then the parasitic HMRC decided it wanted a much larger slice of that pie.

Sadly, all flavours of UK government have had their grubby mitts on IR35 and failed to do anything meaningful with it. Labour introduced the idea (thanks Gordon Brown), the Lib/Con coalition did a "review" of it and then the latest Conservative govt got it over the line. HMRC are just responsible for collecting the taxes, not making the laws.

Infosys has been doing rather well since the legislation hit the private sector though.

It was shameful that IT contractors making 800£ per pay paid less taxes than a waiter making 200£ per week. IR35 is probably the only reasonable thing the conservative governments from Cameron onwards have done

I think what a lot of people forget to mention / misunderstand about LtdCo contracting is that, yes you can choose to draw a small PAYE salary and take little to no dividend and pay next to no tax in a particular tax year, if you so choose.

However, the surplus funds belong to the business, not the individual, and reside in the business bank account. Should the contractor choose to leave this "profit" in the business, it is taxed according to UK Corporation tax rules. Should the contractor draw this profit down via PAYE or dividends or Directors loans or whatever, it triggers tax events, which will result in tax due on the contractors Self Assessment.

A quick run of the numbers from your post on contractorcalculator.co.uk suggests the contractor pays substantially more tax on the income than the waiter, assuming the contractor is running their business within HMRC's rules.

edit: forgot to mention corporation tax liability in addition to SA liability.

The truth is that these Ltds were vehicles to avoid taxes, not real businesses. These contractors were effectively employees that managed to get payed in a way that allowed them to avoid taxation. I know people that payed close to 7% total tax before IR35, as much as somebody earning 15K per annum.

IR35 doesn’t prevent real businesses from operating as usual. It prevents masked employees (people that attend standup, have a company email, have an account on Teams, effectively report to a manager, etc…) from avoiding taxes and claiming iPhones and PlayStations as expenses.

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