What IT Contractors can expect in 2025

The last 12 months has been an interesting one for the IT industry, with some significant tech trends emerging or cementing themselves as important elements of the tech stack.

Let’s take a look at what we can expect for IT contractors in 2025.

The IT jobs market

The state of the jobs market for IT contractors depends a lot on which industry you’re looking at, but across four of the biggest sectors—finance and banking, healthcare, retail and ecommerce, and manufacturing—the news is looking positive.

Both financial institutions and healthcare providers are ramping up their digital transformation efforts, while the manufacturing sector, long an industry that can be slower moving, is also embracing 4.0 technologies. For retailers, the shift from brick-and-mortar stores to ecommerce means brands are heavily investing in tech, presenting numerous opportunities for IT contractors.

Skills in demand

The rapid development of IT technology means the skills required for IT contractors changes more frequently than many industries. In the last 18 months alone, artificial intelligence and machine learning have become essential technical disciplines contractors need to be familiar with—and they are only going to become more important during 2025. These skills are in addition to cloud computing and cybersecurity which, although not as new to IT contractors, will continue to be at the forefront of the industry next year.

Contractors with niche skills in these areas won’t just find themselves in demand, but they’ll also be in a position to charge higher rates. Unfortunately, the opposite will be true for contractors whose experience is centred around legacy systems.

Tax & legislation

There were a few tax changes announced in the autumn budget that could impact contractors if they operate as a limited company.

First of all, Employer National Insurance Contributions (ERNICs) are rising from 13.8% to 15%, while the secondary NI threshold is also being reduced from £9,100 to £5,000. This impacts contractors because employment costs are deducted from their agreed assignment rate, so IT contractors’ gross income will be reduced unless they can negotiate an increase in their assignment rate.

Employer NICs are increasing for limited company directors too, which will impact contractors for three reasons:

1. This could lead to tighter budgets and reduce spending elsewhere in the business, including on contractor engagements.
2. On the other hand, there could be an increased demand for highly skilled contractors because there’s no ongoing salary commitment—unlike with full-time employees.
3. Although ERNICs aren’t payable when hiring contractors, businesses might try to claw back some of those losses from contractors by putting pressure on them to accept lower rates.

IR35

The off-payroll working rules, also known as IR35, will have an ongoing impact on contractors across every sector, and IT is no different. Although the burden of responsibility falls to the end-client to ensure they’re compliant, it’s still important for cctractors to be aware of the legislation.

The primary negative impact of IR35 for contractors, which is designed to protect them from having to engage in employee-like contracts without any of the benefits, is that it leads to caution among end-clients when it comes to hiring contractors. This could limit opportunities next year, making the development of your skillset even more important.

To find out how Warr & Co can help IT contractors to structure their umbrella companies and maximise tax efficiency, get in touch with the expert accounting team, or book a free contractor accounting consultation.