How you identify as an independent worker could impact your earning potential, new data suggests

By Katherine Steiner-Dicks Last updated Feb 17, 2025

Dave Chaplin of IR35 Shield

New research from contractor insurer Qdos reveals how independent workers in the UK identify themselves, a factor that could significantly influence their earning capabilities and the types of work they attract.

The 2024 survey, capturing insights from 940 self-employed individuals, suggests a potential link between self-identification and financial success. Despite economic jitters, the majority are weathering the storm rather well.

The survey found that the largest group (50.64%) identified as “contractors,” a term often associated with higher-paying, project-based work. Following this group are “business owners” (29.79%), a category suggesting a focus on building and scaling a venture, potentially leading to higher long-term earnings. “Self-employed” individuals make up 11.81% of the respondents, while “freelancers,” often associated with more flexible, short-term assignments, represent 7.77%.

Are you perceived differently by clients?

This self-categorisation may have implications for how these individuals are perceived by clients and the types of opportunities they pursue. For example, those identifying as “contractors” might be more likely to target large organisations with complex projects, commanding higher day rates. “Business owners,” on the other hand, might focus on developing a portfolio of services or products, aiming for recurring revenue streams and potentially higher overall income. “Freelancers” may prioritise flexibility and variety in their work, but potentially at the cost of consistent income or higher earning potential.

What do your contracts look like?

Beyond self-identification, the survey also covered the contractual arrangements used by independent workers. Just over half (55.04%) operate under formal contracts based on Statements of Work (SOWs) with clear deliverables. This suggests a focus on project clarity and defined outcomes, which can be beneficial for securing higher fees and managing client expectations.

Just under one-third (31.17%) use formal time-and-materials contracts, a model often used for projects where the scope is less defined upfront. A smaller percentage (11.88%) work more casually without formal agreements, a practice that could lead to uncertainty in payment and project scope, potentially impacting earnings.

A small fraction (1.91%) work on a retainer basis, which offers predictable income but may limit the scope for higher earnings through variable project work.

The prevalence of SOW-based contracts among the surveyed population could indicate a trend towards more formalised working relationships within the independent sector. This choice could be a factor in driving higher earning potential, as it provides greater clarity and security for both the independent worker and the client.

The economy: how is it making workers feel?

Despite inflation and economic uncertainty, the majority, some 76.68% of respondents rated their business performance in 2024 as “consistent” or “successful,” reflecting an encouraging level of resilience. Nearly half earned between £500 and £749 per day, with 15% achieving even higher rates, showing strong demand for specialised skills despite broader economic challenges.

However, 2024 was a tough year for many creatives with the onset of AI propelling some clients to not use freelancers at all. Plus, IR35 reform continues to cast a long shadow, with most professionals finding it “difficult” to acquire and maintain outside IR35 contracts – though almost three-quarters were, thankfully, able to do so.

Of the 20% of respondents who used umbrella companies in 2024, 90% did so out of necessity, not preference – a stark reminder of the constrained choices for many operating through Personal Service Companies (PSCs).

Trusted relationships: they bag more jobs than online tools

Despite some clients, platforms and recruiters, preferring online and AI tools to weed through CVs, trusted relationships are more successful than digital tools and recruitment agencies. Some 42% work with repeat clients and 31% landing work through referrals, highlighting the power of personal connections.

Income insecurities: are they getting better or worse?

The tale we all know continues for another year. That is income insecurity, which remains the biggest drawback, with 62.37% citing it as a primary challenge, underscoring the financial risks of independent work.

While 41.65% of independent workers feel “fairly confident” about their prospects heading into 2025, concerns including tax hikes, IR35 reforms, and securing work continue to weigh heavily. Nearly 68% plan to continue being self-employed, but growing dissatisfaction – driven by policy shifts, income instability, and economic pressures – is pushing some to consider alternative paths. Perhaps unsurprisingly, of those who felt their business performance was inconsistent or poor, economic uncertainty was the leading factor cited by one-third (33.67%.).

IR35: the thorn in every independent worker’s side

IR35 reform remained a significant challenge in 2024, with 31.12% attributing it as the biggest factor affecting their performance.

Dave Chaplin, CEO of tax compliance firm IR35 Shield, shared his take on the IR35 situation: “It is no surprise that IR35 is of great concern to the UK’s contracting workforce but it is assuring to hear that 70.5% are working in ‘Outside IR35’ roles, suggesting that firms are feeling more confident about hiring contractors again.”

Chaplin said when it comes to HMRC conducting compliance checks, provided firms have strong compliance in place, there are no issues and enquiries close down relatively quickly.

“The initial fear stoked by scaremongers hasn’t materialised, and more firms are realising that hiring on-demand contractors on a ‘for services’ basis is not difficult and is also more cost-effective for their businesses,” said Chaplin.

Chaplin also offered advice to those struggling to secure outside IR35 engagements:

To the 58.4% of contractors in the survey who say they are finding it hard to secure ‘Outside IR35’ engagements, I would suggest that they will find it easier if they can increase leverage by making themselves highly in-demand. Many large firms adopt low risk averse approaches, which means they will only hire ‘Outside IR35’ if they have no other option.

More people will leave self-employment if things don’t change

As Chaplin notes regarding the survey finding that 45.28% are planning to leave self-employment, he said, “UK Plc desperately needs growth to pay for increased Government spending and the UK’s self-employed workforce can help them. The off-payroll (IR35) rules have created an impediment to people exercising their right to be their own boss, diminishing the value flexible workforce that the UK needs.

He continued, “Labour wants growth but cannot acknowledge the benefits the self-employed bring. They do not even understand what being self-employed means.”

Chaplin added, “Labour needs to heed that 45.28% figure, cut the red tape and hang on to these workers.”