Contractor vs Employee: Which Is Better for Electricians?

At some point in every electrician career, the question comes up: should I stay employed or go self-employed? It is one of the biggest financial decisions you will make, and the right answer depends on your circumstances, personality, and goals.

There is no universally correct answer. Employment offers security, structure, and benefits. Contracting offers higher income, freedom, and control. Many electricians try both during their career, and some move back and forth depending on market conditions and personal circumstances.

This guide breaks down the financial, tax, and lifestyle differences between contracting and employment so you can make an informed decision. If you have already decided to go self-employed, this guide will help you understand the financial implications.

Let us compare two electricians doing similar work in the same area — one employed, one self-employed. This is a realistic example for a qualified electrician with 5 years of experience working in the Midlands:

In this example, the self-employed electrician earns £45,300 before tax, compared to £40,000 salary for the employed electrician. But the employed electrician total package (including employer contributions, holidays, and benefits) is £52,600. The self-employed electrician also has no paid holidays, no sick pay, and bears all the business risk.

The financial advantage of self-employment becomes clearer at higher day rates. At £350 per day, the self-employed electrician gross income rises to £73,500 — a much larger gap over the employed equivalent.

The tax treatment is fundamentally different for employees and self-employed workers. Here is how it works:

The ability to deduct business expenses is a significant advantage of self-employment. An employed electrician earning £40,000 pays tax on the full £40,000 (minus the personal allowance). A self-employed electrician earning £58,000 gross but spending £13,000 on legitimate business expenses pays tax on £45,000 — a lower taxable income.

If you set up as a limited company, the tax treatment changes again. Corporation tax is paid on company profits (currently 19-25%), and you extract income via a combination of salary and dividends. This structure can save significant tax at higher income levels.

IR35 is one of the most misunderstood pieces of tax legislation in the UK. It targets "disguised employment" — situations where a worker operates through a limited company or as a sole trader but is effectively an employee of a single client.

Since April 2021, medium and large clients are responsible for determining whether IR35 applies to a contract. If the client determines you are inside IR35, they must deduct income tax and employee NI from your payments, effectively treating you as an employee for tax purposes. This significantly reduces the tax advantages of operating through a limited company.

Most sole trader electricians working on CIS are not directly affected by IR35. It primarily affects limited company contractors working for a single large client. However, all self-employed electricians should understand IR35 and ensure their working arrangements genuinely reflect self-employment.

The Construction Industry Scheme (CIS) applies to most self-employed electricians working as subcontractors in the construction industry. Under CIS, the contractor (the company paying you) deducts tax from your labour payments at source:

CIS deductions are not an additional tax — they are advance payments toward your total tax liability. When you file your Self Assessment return, the CIS deductions are credited against your income tax and NI bill. If you have been overcharged (because your expenses reduce your taxable profit below the amount implied by 20% flat deductions), you will receive a refund from HMRC.

Keep your CIS statements from every contractor. You need these for your Self Assessment return. Elec-Mate expense tracking helps you keep all financial records organised and accessible.

Employment offers genuine advantages that are often undervalued by electricians keen to go self-employed. Before you make the switch, consider what you are giving up:

Employment is particularly attractive for electricians with young families, mortgages, or a preference for work-life separation. There is nothing wrong with choosing employment over self-employment — it is a valid, well-paid career path.

Self-employment offers a different set of advantages — higher income potential, more freedom, and the opportunity to build something of your own:

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If you have decided to go self-employed, do not jump in unprepared. The transition is smoother if you plan ahead:

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