Question 1

What is IR35?

Accepted Answer

IR35 (also called the off-payroll working rules) is HMRC legislation designed to ensure contractors who work like employees pay similar income tax and National Insurance as employees. If your contract falls "inside IR35", you are taxed as an employee. "Outside IR35" means you can operate tax-efficiently through a limited company.

Question 2

How much more do I take home outside IR35?

Accepted Answer

The difference is significant. At a £500/day rate over 220 days (£110,000 gross), outside IR35 typically gives you around £20,000–£25,000 more take-home pay per year than inside IR35. Our calculator shows the exact figure for your specific day rate.

Question 3

Who determines whether I am inside or outside IR35?

Accepted Answer

Since April 2021 (off-payroll working rules), for medium and large private sector engagers, the end client determines IR35 status — not the contractor. Small companies are exempt and the contractor still determines their own status. HMRC's CEST tool at gov.uk can help assess status, but many contractors also seek legal opinion.

Question 4

What happens if I am caught inside IR35?

Accepted Answer

If HMRC determines a contract should have been inside IR35, they can demand back-payment of income tax and National Insurance, plus interest and penalties. The liability can fall on the engager (if they made the determination) or the contractor. Always get a proper contract review from an IR35 specialist.

Question 5

Can I have some contracts inside and some outside IR35?

Accepted Answer

Yes. IR35 status is determined contract by contract, not per person or company. You could have one contract inside IR35 and another outside simultaneously. You must account for the income and tax separately for each contract.

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