Final note first:
I think the general individual doesn't want a contractor to increase their day rate - the truth is I suspect people don't like the fact that intelligent professional consultants with expertise charge a lot of money and can out-do them technically, which is the reason we are sourced in the first place to help expedite projects!
Contracting through a Limited Company structure is NOT 'self-employed'. Self-employed is an unlimited liability company and is entirely different from a taxation point of view.
Less than 1% of contractors using a Limited Company structure did the following in the past:
*Earn a day rate from client(s)
*Maximise expenses for staying away from home
*Pay themselves a small wage for NI purposes
*Send money offshore and receive 95% back as a loan from a dodgy company
All the above are legitimate except the last one! There is now a dividend tax to ensure contractors pay more tax - if you hold dividend-paying shares then you will also be paying this dividend tax if it is above £5000 per tax year.
Your average Joe Contractor is not dodgy and will have the Limited Company they are a director of paying their own pension, health insurance, holidays and everything else a permanent employee accepts as part of a remuneration package.
99% of contractors are not dodgy and are simply providing services through the only viable existing method which accounts for the ability to have the same benefits as a permanent employee but - importantly - *PAID FOR BY THEMSELVES* (in the form of money brought into said Limited Company).
If you can't understand and are annoyed that someone has bought a brand new Porsche911 as a contractor then remember this: some contractors are idiots with no future plan, no savings and no understanding of the tax system. Much like your average permanent human in the UK, they spend beyond their means.
If someone chooses to spend all their cash now then you can safely be assured - regardless of employment status or style - their risk of trouble in the future is heightened. Don't for one second think contracting is a 'get rich scheme' with people avoiding tax. I can assure you it absolutely is not.
Thing thing to target to get more revenue for HMRC is offshore shifting of monies - it's still happening on a massive scale and accounts for billions missing in the exchequer. In a sense it is not entirely legal.
I'm an experienced consultant and my average income post-tax for the past decade is the equivalent of £65,000. I can earn more in a permanent job but enjoy running my own business, working on programmes requiring a lot of expertise and new technology and managing my own personal development. If I work away from home I do claim most things - but as a permanent employee working from home you also have your accommodation and what-not paid for, so what's the complaint?
To punish those who function through these structures and are not using offshore schemes seems an easy way to increase costs to clients; either by said clients using large professional services (Deloitte, PWC, Accenture, etc) or an increase in day-rates from £500/day to £700/day to compensate.