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A Guide to the IR35 Changes

On April 2021, the UK government introduced legislation changes regarding the relationships between contractors and companies. 

IR35 is the tax law that wants to stop people leaving a job and then returning to the same job as a contractor (usually as a limited company).

Learn here the new IR35 rules and how could that affect your business!   

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What changed with the new IR35 legislation?

Historically, there have been contractors in the UK that set up a limited company structure to take payments from clients and pay less in taxes.  

The UK government felt like these workers were exploiting the tax system by working as contractors when they should have been actually classified as normal employees.

Because of this, from last year, you stop being able to decide if IR35 applies to you or not. This way, under IR35 legislation, companies subjected to it are responsible for determining the IR35 status of their own contractors, which means your income tax and National Insurance tax will be deducted directly from your wage.

In short, a employee not integrated in a limited company is now called a "deemed employee" and, for that reason, subject to taxes.

 

 

What are the exceptions for IR35?

There are some exceptions for the IR35 legislation as, for instances, some small businesses that must meet at least two of the following criteria:

  • Annual turnover of less than £10.1 million;
  • Gross assets of less than £5.1 million;
  • Fewer than 50 employees.

 

What if I am considered to be "outside IR35"?

Contractors who are correctly classified as contractors are considered self-employed, which means they are free to pay themselves in the way they find to be the most efficient for their tax liability. You can work through a limited company, as long as you are not avoiding taxes.

 


 

Whether you are a PAYE or CIS employee or self-employed, Tommy's Tax is here to help you with your tax refund! The process through our app only takes 5 minutes. With our "no refund, no fee" policy, we can check to see if you're owed any money for free!

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We encourage everyone to read our blogs and free tax refund calculators 
so you can learn more about how tax affects you! 

 

Published by Elisa Ribeiro Soares
Elisa Ribeiro Soares