A Contractor working through a Limited Company needs to know about IR35 – which has been in existence since 2000. IR35 refers to a hypothetical contract between the Contractor and the end-client, which affects how much tax is payable. If it is decided the contract is more like employment than self-employment, then the Contractor is caught by or inside IR35. The Contract (sales) income is then treated like salary for tax purposes – and PAYE and National Insurance is payable to HMRC. If the Contractor is not caught by or outside IR35, they can pay themselves just as any Company would, ie. taking a small salary and paying dividends, splitting dividends with a spouse and getting tax relief on expenses. All of these reduce the tax paid.
Huge changes are now imminent for Contractors – especially those working in the Private Sector.
This page includes a series of three videos covering IR35 in the Private Sector, including advice on how to protect yourself.
How Contractors can protect themselves
Some ideas on how to deal with your end client and agency and how to find out more about your options.