IR35 Working - New to me

[Djh91]

So in the process of accepting a role, it's a 6+ Month contract under IR35.

About 10 years ago I worked as a contractor through an agency/umbrella company and it worked fine, this was before IR35 was a thing.

I will be going through an Umbrella company again this time, I have been recommended two that look reputable/have good reviews.

Has anything changed massively or is there anything I need to know?

From what I can see/read it's similar to when I did it a while ago, no sick pay no holiday pay, paid and expenses submitted via the umbrella company who then bill the employer (In a very basic summary)

Thanks

[Eric Mc]

IR35 is over 20 years old.

[Lee-he7us]

You will literally lose 50% of your take home pay.. I did it for a year, i would not recommend.

[Djh91]

Lee-he7us said:

You will literally lose 50% of your take home pay.. I did it for a year, i would not recommend.

Please elaborate?

From my limited understanding it just means I'm taxed the same as a full time employee? I'm ok with that, I wouldn't lose 50% of my income if I was employed directly by them. What's different?

[Djh91]

Eric Mc said:

IR35 is over 20 years old.

Wasn't aware of this!

Didn't go through an IR35 contract last time i did the same type of work.

[The Mad Monk]

https://www.gov.uk/guidance/understanding-off-payr...

[NDA]

Hopefully you won't have to register for VAT. One thing to be aware of.

[Lee-he7us]

Djh91 said:

Please elaborate?

From my limited understanding it just means I'm taxed the same as a full time employee? I'm ok with that, I wouldn't lose 50% of my income if I was employed directly by them. What's different?

I can send you a breakdown of one of my payslips if you like?

You pay NI for employee and employer, plus other things, my take home pay is literally half my top line

[Ranger 6]

Djh91 said:

Lee-he7us said:

You will literally lose 50% of your take home pay.. I did it for a year, i would not recommend.

Please elaborate?

From my limited understanding it just means I'm taxed the same as a full time employee? I'm ok with that, I wouldn't lose 50% of my income if I was employed directly by them. What's different?

Not a good statement to say you'll lose 50% - the key difference between you and a full time employee is that they will take Employers NI and Apprenticeship levy out of your assignment rate (it's not a day rate any more as you have to pay the employers NI) before they calculate your taxes.

I suggest you work out an approximate annual salary from your rate and use this calculator to see what will be taken off - https://www.experlu.co.uk/calculator/employer-nic

So, for example £400 per day, means you will have £44 + Apprenticeship levy, taken off before your employees NI and income tax is calculated

[Lee-he7us]

Doesn't Look like I can PM

I wonder if attaching here would be a bit crass

[Lee-he7us]

Ranger 6 said:

Not a good statement to say you'll lose 50% - the key difference between you and a full time employee is that they will take Employers NI and Apprenticeship levy out of your assignment rate (it's not a day rate any more as you have to pay the employers NI) before they calculate your taxes.

I suggest you work out an approximate annual salary from your rate and use this calculator to see what will be taken off - https://www.experlu.co.uk/calculator/employer-nic

So, for example £400 per day, means you will have £44 + Apprenticeship levy, taken off before your employees NI and income tax is calculated

Its not a good statement true, but its a reality..

My top line and take home were nigh on 50% difference, i have a payslip in front of me here showing the figures.

[Djh91]

While i appreciate all of what's been said..

For clarity - In my situation

my take home will still be more than it is currently - i accept the risks/downsides.

This is a stepping stone, I intend to go full time with the company after a period of time. This is my end goal.

So my intention of working as a contractor/under IR35 is not to squirrel away as much as I can. I value the safety of working as a full time employee - This is just what I believe to be the best route to take at this moment in time.

More than willing to accept the downfalls in the mean time, if i pay a bit more NI so be it.

[Lee-he7us]

Djh91 said:

While i appreciate all of what's been said..

For clarity - In my situation

my take home will still be more than it is currently - i accept the risks/downsides.

This is a stepping stone, I intend to go full time with the company after a period of time. This is my end goal.

So my intention of working as a contractor/under IR35 is not to squirrel away as much as I can. I value the safety of working as a full time employee - This is just what I believe to be the best route to take at this moment in time.

More than willing to accept the downfalls in the mean time, if i pay a bit more NI so be it.

Fair play to you matey, you do what suits you, hope it all works out for you

[Ranger 6]

Lee-he7us said:

Its not a good statement true, but its a reality..

My top line and take home were nigh on 50% difference, i have a payslip in front of me here showing the figures.

Really?

The Employers NI and apprenticeship levy is half your assignment rate? And to be completely clear here I'll use the same £400 that I mentioned previously - you are paying £200 in taxes?

Or are you saying that as a permie you got £400 per day before tax, and inside IR35 you get £200 per day after employers NI?

From what you've said I'm guessing that your perm salary and contract rate are actually two very different amounts.

[Lee-he7us]

Ranger 6 said:

Really?

The Employers NI and apprenticeship levy is half your assignment rate? And to be completely clear here I'll use the same £400 that I mentioned previously - you are paying £200 in taxes?

Or are you saying that as a permie you got £400 per day before tax, and inside IR35 you get £200 per day after employers NI?

From what you've said I'm guessing that your perm salary and contract rate are actually two very different amounts.

You pay employers NI too, day rate of £575 per day, i worked 25 days in that month and the money I received after all deductions was £7791.89. Im sure you can work out what the topline was...

[Countdown]

Lee-he7us said:

Its not a good statement true, but its a reality..

My top line and take home were nigh on 50% difference, i have a payslip in front of me here showing the figures.

That's probably because previously (if you were working through your own Ltd Company) you were able to avoid both Ers Ni and Ees NI by keeping your PAYE income to a low level and taking the rest as dividends.

[Djh91]

Lee-he7us said:

Fair play to you matey, you do what suits you, hope it all works out for you

Appreciate it!

I've done as much basic reading up as i can and see nothing worrying but just figured a lot of people on here, like yourself have experience with it over a longer period of time.

[Djh91]

Lee-he7us said:

Fair play to you matey, you do what suits you, hope it all works out for you

Appreciate it!

I've done as much basic reading up as i can and see nothing worrying but just figured a lot of people on here, like yourself have experience with it over a longer period of time.

[theboss]

If you can afford to forego a significant chunk of the earnings, use an umbrella company that will facilitate salary sacrifice into a SIPP or other private pension scheme. That's the only way you can really avoid the pain of the combined employer + employee payroll deductions.

Even if you were to get an outside IR35 contract, distributing dividends to avoid NI isn't so great anymore, above £50k the marginal CT rate is 26.5% and Div tax rate is 33.75% so the two combined are not much lower than the equivalent PAYE deduction. The Dividend allowance which started at £5k when dividend tax was introduced has been reduced to £500.

[mikef]

Lee-he7us said:

You will literally lose 50% of your take home pay.. I did it for a year, i would not recommend.

You may be able to mitigate that by paying into a personal pension

I did some inside consulting last year. Here's how one of my umbrella payslips breaks down:

Umbrella Income	100.00%
Umbrella Margin	00.40%
Employers NI	05.62%
Apprenticeship Levy	00.22%
Pension	50.00%
Gross Pay	43.76%
PAYE	07.76%
Employee NI	02.06%
Umbrella Fees	00.20%
Net Pay	33.74%
Pension + Net Pay	83.74%

(making sure that over the whole tax year my pension contributions did not exceed 100% of annual earnings)