IR35 was introduced by the government to stop workers such as contractors from working as disguised employees. Essentially, the legislation was implemented to stop these individuals from enjoying the tax benefits of the self-employment by taxing them at a rate similar to employees.
IR35 originally came into action in 2000. When it was introduced, it was the responsibility of the contractor to determine and declare their own IR35 status.
This changed when HMRC deemed that too many companies were not compliant and from 2017, in the public sector, it instead became the responsibility of the client to decide the contractor’s IR35 status. For more information on the public vs private sectors for contractors, check out our handy guide.
Under current IR35 rules in the private sector, it is the contractor that is responsible for establishing their own IR35 status and the risk of non-compliance sits with them.
However, from April 2021, this will become the responsibility of the end-client, introducing a new tax burden on any client that decides to work with contractors. This is true for all clients except small businesses.
A small business as determined by The Companies Act 2006 has two or more of the following features:
All other clients will be responsible for determining IR35.
If a client decides that the contractor is inside IR35, they will be taxed before their fee is paid to them, just as if they were an employee.
Although they will be forced to pay tax like an employee, they will still be considered self-employed and therefore will not receive employment benefits such as statutory rights. These include things like holiday pay, sick pay, a workplace pension and maternity and paternity leave.
If you are outside IR35, however, you can continue to benefit from the tax advantages of self-employment by paying yourself a salary and withdrawing further income from dividends which are not subject to National Insurance Contributions.
These reforms to IR35 are set to badly impact thousands of self-employed contractors, with some large firms planning to stop working with contractors altogether.
To determine a contractor’s IR35 status, there are certain criteria to look out for. Some of the main indications include:
As reforms to IR35 draw ever closer, many self-employed contractors are inevitably feeling worried about what this will mean for them.
After all, contractors that are caught out by IR35 will be required to pay more in tax and National Insurance in line with employee rates, but won’t receive the benefits of being an employee.
If you find yourself in this position, there is a way to avoid IR35 – by operating through an umbrella company.
An umbrella company employs the contractor, putting them on their payroll, paying them a salary and taxing them through PAYE. Umbrella contractors receive statutory benefits enjoyed by employees and won’t have to take care of time-consuming tasks involved with running their own business such as invoicing.
Working through an umbrella company is considered a great route for contractors, offering a range of benefits, including:
So, if you are concerned about being caught out by IR35 in 2021, an easy way to ensure to avoid the problem altogether is to go umbrella.
If you decide this is the right move for you, the next step will be to find the best umbrella company for your contracting needs.
Umbrella Supermarket’s umbrella comparison tool allows contractors to quickly and easily compare umbrella companies in just 2 minutes, helping you find your perfect fit. After all, every contractor has different needs, meaning it’s important to find a company that works for you.
Whatever your preferences, from more money to help with things such as childcare credits, our umbrella comparison calculator will let you find the best umbrella company for you.
Simply enter a couple of details, hit go and compare companies best geared towards you in an easy to read list. If you’re ready to make the move to an umbrella company, let our umbrella calculator help you today.
Any contractor considering switching to an umbrella company will want to know how to find the best provider to work with.
Although you could spend your precious time and energy searching the web for the best umbrella company, there is an easier way – using an umbrella calculator.
In this guide, Umbrella Supermarket explains why every contractor should use an umbrella calculator in 2021.
If you are considering contracting you will need to decide on PAYE or umbrella.
It can be a difficult decision to make and contractors will inevitably be questioning which option will be the best for them.
To help every contractor get on the right track for them, in this guide Umbrella Supermarket looks at PAYE vs umbrella, outlining the key differences and how this will impact you.
There are many reasons that contractors across the UK opt to work under an umbrella company.
Umbrella companies offer an easy way to contract and remove the need for the contractors to worry about the burdens of admin, finances, tax and IR35, all things that limited company contractors have to deal with.
For this reason, many contractors will be weighing up their options and questioning whether it is worth using an umbrella company in 2021. To help make the decision that little bit easier, Umbrella Supermarket has put together this guide on the pros and cons of using an umbrella company.
Any contractor that is considering operating through an umbrella company in 2021 will need to understand Umbrella Company fees - from why an umbrella company charges fees, how they are paid to how much the contractor will pay.
In this guide, Umbrella Supermarket answers those all-important questions to help every contractor know exactly where they stand when it comes to umbrella company fees.
If you’ve made the decision to contract through an umbrella company in 2021, you will next need to find an umbrella company that’s right for you.
After all, there are lots of umbrella companies out there, so how do you know which one to choose?
To help you find the best umbrella company for you, in this guide Umbrella Supermarket outlines what makes a good umbrella company, so you can rest assured you’re making the right move.
One of the many advantages to operating through an umbrella company for contractors is that they become an employee of their chosen provider.
In turn, this means that the contractor will be automatically enrolled onto the umbrella company’s workplace pension scheme.
To help contractors find out more about umbrella company pensions Umbrella Supermarket has put together this handy guide.
If you are considering contracting through an umbrella company you will naturally have questions and queries over how they work.
After all, making the move to umbrella can be a big step for contractors. To help, in this guide Umbrella Supermarket explains how to get started with an umbrella company and share our top tips for using one in 2021.
PAYE or umbrella is a question asked by every contractor. Which one you opt for will have a big impact on your contracting career and lifestyle. So, it's important to make the right decision for you.
To help makes things a little bit easier, Umbrella Supermarket has put together this guide on PAYE or umbrella, outlining the key differences between each, to help you make the best and most informed decision for you.
One of the many benefits to working through an umbrella company is that you will receive holiday pay as well as a range of other statutory benefits including sick pay, maternity and paternity pay.
To find out more about umbrella company holiday pay, and how to calculate how much you will be entitled to, Umbrella Supermarket has put together this handy guide.
Contractors must make several decisions throughout their contracting careers. One big decision contractors have to make is how they will operate.
One way that contractors can work is through an umbrella company.
Umbrella companies have become an increasingly popular way to contract in the past few years, offering many benefits to the contractor. But, how do you know whether this option is right for you?
To help every contractor make the right decision for them, in this guide, Umbrella Supermarket explains when not to use an umbrella company.
There are tons of benefits to using an umbrella company, which is why they have become such a popular option for contractors in recent years.
After all, an umbrella company takes away the stress and hassle of operating through a limited company whilst offering contractors a range of advantages, such as statutory rights, paying them a salary, deducting correct tax levels and National Insurance, and taking care of tasks like expense processing and invoicing.
However, as more and more contractors opt to use the services of an umbrella company, more providers have started to claim that they are HMRC approved.
To bust the myths around HMRC approved umbrella companies and get straight to the facts, in today's guide Umbrella Supermarket look at whether HMRC approved umbrella companies really exist, so you know exactly where you stand.
If you're considering making the leap to contracting, you will understandably want to know how much you will have to pay in umbrella company costs. After all, this amount comes directly out of the contractor’s pocket, so it’s important to be clued up on how much you should expect to pay.
To help contractors, in this guide Umbrella Supermarket answer the all-important question of how umbrella companies cost in 2021.
