logo
admin September 8, 2022 No Comments

Should I Take a Contract inside Ir35

As a freelancer or a contractor, one of the biggest decisions you`ll have to make is whether to accept a contract that falls within IR35 or not. This decision can have a significant impact on your earnings, tax obligations, and overall job satisfaction. In this article, we`ll explore the pros and cons of taking a contract inside IR35, and help you make an informed decision.

What is IR35?

IR35 is a tax legislation introduced by HM Revenue and Customs (HMRC) in 2000. The purpose of the legislation is to prevent workers from setting up limited companies to avoid paying the appropriate amount of tax. Essentially, IR35 determines whether a contractor is genuinely self-employed (outside IR35) or is effectively an employee (inside IR35) for tax purposes.

What does taking a contract inside IR35 mean?

If you take on a contract that falls within IR35, it means that you will be subject to the same tax and national insurance contributions as an employee. This can significantly reduce your take-home pay, as you will not have access to the tax benefits that come with being self-employed. Additionally, you may not have the same level of control over your work as you would if you were outside IR35, as your contract may dictate your working hours and conditions.

Pros and cons of taking a contract inside IR35

Pros:

Steady income: If you are working inside IR35, you will be paid a regular salary, just like an employee. This means that you will have a regular income, which can be reassuring if you don`t like the uncertainty that comes with freelancing.

Employee benefits: When you are inside IR35, you are essentially treated as an employee for tax purposes. This means that you may be entitled to some of the same benefits as a regular employee, such as holiday pay and sick pay.

Less paperwork: When you are working inside IR35, you don`t need to worry about managing your own taxes and national insurance contributions. Instead, your employer will take care of all of this for you, leaving you free to focus on your work.

Cons:

No tax benefits: When you are inside IR35, you won`t be able to take advantage of tax benefits that come with being self-employed. This includes claiming expenses such as travel, equipment, and training.

Less control: If you are inside IR35, you may not have the same level of control over your work as you would if you were outside IR35. Your contract may dictate your working hours and conditions, which can be restrictive.

Lower take-home pay: When you are inside IR35, you will be taxed like an employee, which means that your take-home pay will be lower than if you were outside IR35.

So, should you take a contract inside IR35?

The answer to this question will depend on your individual circumstances. If you prefer a steady income and don`t mind giving up some control over your work, then working inside IR35 may be a good option for you. However, if you value your independence and want to take advantage of tax benefits, then working outside IR35 may be a better choice.

Ultimately, it`s important to weigh up the pros and cons of both options and make an informed decision based on your personal preferences and financial goals. Whatever decision you make, be sure to seek professional advice from an accountant or tax specialist to ensure that you are fully aware of your obligations and entitlements.

X