If you work through your own limited company, IR35 affects how much of your income you actually keep. The rules decide whether HMRC treats your working arrangement as genuine self-employment or disguised employment, and the difference in take-home pay is significant.
We've put together a free guide that walks through the off-payroll working rules in plain English. No jargon, no fluff. Here's a summary of what it covers.
Who decides your status
It depends on who you're working for. Medium and large private sector clients have been responsible for determining IR35 status since April 2021. If the client is small (below the Companies Act thresholds), the responsibility sits with you and your company. In the public sector, the client has made the call since 2017.
If you haven't received a Status Determination Statement from your end client, it's worth asking for one so you know where you stand.
The three factors that matter most
HMRC and tribunals look at the reality of the working relationship, not just the contract. Three things carry the most weight:
Substitution — Can your company send someone else to do the work? A genuine, exercisable right of substitution supports an outside-IR35 position. A clause that only exists on paper carries little weight.
Control — Does the client dictate how, when and where you work? Project-based work where you decide your own methods and schedule looks very different from sitting in the client's office reporting to a line manager.
Mutuality of obligation — Is there an ongoing obligation for the client to provide work and for you to accept it? Fixed-scope projects with a clear end point are more consistent with a business-to-business relationship.
Why it matters commercially
Outside IR35, your company receives gross fees and you extract income through salary and dividends. Inside IR35, PAYE and National Insurance are deducted at source, but you don't get the employment rights that come with being on staff. The result is lower net pay without the safety net.
If an engagement moves from outside to inside IR35, your effective income from the same day rate drops considerably. Understanding your position before agreeing terms helps you price accordingly.
Practical steps to support your position
The guide covers this in detail, but the key actions include working for multiple clients, defining deliverables rather than roles in your contracts, maintaining your own business presence (insurance, website, marketing) and avoiding behaviours that blur the line between contractor and employee.
Common mistakes to watch for
Relying on the client's SDS without checking it reflects reality. Focusing on what the contract says while ignoring how the engagement actually works day to day. Not revisiting your IR35 position when the nature of the work changes over time.
Get the full guide
This post covers the headlines. The full guide goes deeper on each area, including HMRC's CEST tool, its limitations and what to do if your result comes back undetermined.
And if you're unsure about your IR35 position or want to make sure your contracts and working practices line up, book a free discovery call and we'll talk it through.
