Inside and Outside IR35: What Contractors Need to Consider for Their Next Day Rate Role in 2022
Within the last year, we have seen a huge rise in the opportunities within the communications, digital and marketing industries. However, as job vacancies are at an all-time high, working on a contract or interim basis is now more lucrative than ever before.
When entering the contractor market, you are probably thinking about the new, exciting projects and the vast amount of experience that you will gain… But to ensure that your day rate is paid correctly, you will need to determine whether your contract is inside or outside IR35.
What does inside IR35 mean?
Introduced in April 2000, the off-payroll working rules ensure that contractors operating in the same way as a permanent employee are taxed at an appropriate level. That means that if your contract is inside IR35, you have to pay income tax and National Insurance, just like permanent employees. Often this is done via an umbrella company.
What does outside IR35 mean?
A contract outside of IR35 means that the HMRC will regard you as self-employed. Therefore, you will be able to pay yourself in a tax-efficient way. This may involve working on defined marketing, digital or communications projects, or working for more than one client. To determine whether a contract falls inside IR35 or outside IR35, you can use HMRC’s check employment status for tax tool.
How do they compare?
Your IR35 status will have an impact on the way you pay your taxes.
