If you’re a contractor, freelancer or self-employed, then you’ve probably heard of IR35. It’s a piece of legislation that has been around for over two decades and aims to tackle tax avoidance by people who provide services through their own limited company, but who would be an employee if they didn’t use that company.
In simple terms, IR35 is all about determining whether you’re employed or self-employed for tax purposes. And if you’re deemed to be “inside” IR35, then you’re treated as an employee, which means you’ll pay more tax and National Insurance.
Let’s take a closer look at some of the key questions surrounding IR35:
What is inside and outside IR35?
As we mentioned earlier, IR35 is all about determining whether you’re employed or self-employed. If you’re inside IR35, then you’re deemed to be an employee for tax purposes, even if you work for yourself through your own limited company. If you’re outside IR35, then you’re treated as self-employed, which means you’ll pay less tax and National Insurance.
Which is better outside IR35 or inside IR35?
It’s not a question of which is better – it all depends on your circumstances. If you’re outside IR35, then you’ll pay less tax and National Insurance, but you’ll also have less employment rights and benefits. If you’re inside IR35, then you’ll pay more tax and National Insurance, but you’ll have more employment rights and benefits. It’s important to weigh up the pros and cons before making a decision.
What does it mean if a job is outside IR35?
If a job is outside IR35, then it means that you’re deemed to be self-employed for tax purposes, even if you’re working for a company. This means that you’ll pay less tax and National Insurance, but you won’t have the same employment rights and benefits as an employee.
Can I work inside IR35 and outside at the same time?
Yes, you can work inside and outside IR35 at the same time. For example, you might have some clients who deem you to be inside IR35, and others who deem you to be outside IR35. It’s important to keep track of your earnings and expenses for each job, so that you can accurately report your tax liabilities.
How much tax will I pay inside IR35?
If you’re inside IR35, then you’ll pay more tax and National Insurance than if you’re outside IR35. The exact amount will depend on your earnings, expenses, and other factors. You should speak to an accountant or tax specialist for more information.
What is the disadvantage of inside IR35?
The main disadvantage of being inside IR35 is that you’ll pay more tax and National Insurance. You’ll also have less control over your work and fewer employment rights and benefits. It’s important to weigh up the pros and cons before deciding whether to work inside or outside IR35.
Is it worth being a contractor inside IR35?
Again, it depends on your circumstances. If you’re happy to pay more tax and National Insurance in exchange for greater employment rights and benefits, then working inside IR35 might be worth it for you. However, if you value your independence and want to pay less tax and National Insurance, then working outside IR35 might be a better option.
Do I need a Ltd company to work outside IR35?
No, you don’t need a Ltd company to work outside IR35. You can work as a sole trader or partnership and still be deemed to be outside IR35. However, having a Ltd company can offer certain tax advantages
Conclusion:
IR35 can be a complex and confusing piece of legislation, but it’s important to understand how it affects you if you’re a contractor or self-employed. Whether you’re working inside or outside of IR35, there are advantages and disadvantages to both options, and it’s important to weigh up the pros and cons before making a decision. We hope that this blog post has provided you with the information you need to make an informed decision about your working arrangements and your tax liabilities.
