Contracting doesn't pay as much as freelancing. Lots of people contract fulltime at companies and ignore the IR35 issues (even though they shouldn't) for around £350/day.
Freelancing is different. You have to deal with all of the issues you mention above, cost of sales etc (though, get yourself an accountant, seriously) but the reward is higher. You're doing things at your own pace and if you're good you can really focus to make solid profit.
Contracting is just a regular hourly wage (and as you rightly point out, not always as good as it looks on the tin).
Freelancing is different. You have to deal with all of the issues you mention above, cost of sales etc (though, get yourself an accountant, seriously) but the reward is higher. You're doing things at your own pace and if you're good you can really focus to make solid profit.
Contracting is just a regular hourly wage (and as you rightly point out, not always as good as it looks on the tin).