IR35 changes and what HMRC’s new rules could mean for you?
IR35, formally known as off-payroll working rules, are stipulations which ensure contractors who are working for companies are paying the correct amount of tax. The system is utilised by HMRC to evaluate and check if a contractor is genuine rather than being used as a ‘disguised employee’ for the purposes of tax paying. IR35 rule changes, however, are set to come into force from next month onwards, potentially impacting hundreds of thousands of people.
New rules mean private sector firms will be given the ability to make up their own minds about a contractor’s IR35 status, rather than the current arrangement which lets contractors decide.
Whom does IR35 apply to?
If your contract is deemed outside IR35, you are considered self-employed for tax purposes and are free to pay yourself in the most tax efficient way, which is typically through a mixture of salary and dividends taken from your company.
If your contract is deemed inside IR35, you’re considered an employee for tax reasons. This means you’re effectively required to pay tax at the same rate as an employee in the same tax bracket.
But for new contractors who need to deal with the IR35 change, there may be some action which can be taken before the alteration occurs.
Techfynder has a solution for those starting work on a self-employed basis for the first time and planning to set up as a company, contractor should get in touch with an expert at firstname.lastname@example.org.