Public or Private Sector: Will you be impacted by IR35?

IR35 in the public and private sector

To help every contractor navigate the sometimes confusing world of IR35, in this guide, Umbrella Supermarket outlines the differences between the public and private sectors and how this will determine whether you will be impacted by IR35.

Public vs Private Sector: What are the key differences?

Whereas the public sector lies under the control of government, the private sector is run by individuals and businesses who make a profit. This leads to several key differences between the two sectors, including:

Objectives and motivations

The public sector’s objectives and motivations are influenced and directed by compulsory regulations, whether that be from local, regional or national bodies and organisations.

However, private sector organisations are not subject to such restrictions. This means that these organisations have the freedom to set their own objectives and motivations. As the private sector consists of individuals and companies, this usually means that their goals are financial and revenue-centric.

Spending and finances

Another main difference between the public and private sector is their spending. As we have mentioned, as the public sector is accountable to several parties that are interested in how they are spending their money and performing, however the private sector isn’t subject to such restrictions. This means the private sector is largely free it spend its money as it wishes.

Transparency

Finally, the two sectors differ in how transparent they are expected to be. After all, as public sector organisations are under the control of government, being open and transparent is of the utmost importance. These organisations must share key information on what they are doing and achieving when asked to disclose it.

Again, however, private sector bodies are not subject to such strict standards. As private businesses and organisations, they can often hold back information if and when they wish.

Those are the main differences between the public and private sectors, so what impact does this have on contractors?

When it comes to the public and private sectors, the main difference that can have a big impact on contractors is how they will be impacted by IR35.

What is IR35?

IR35 legislation initially came into play in 2000. It was introduced to stop workers like contractors operating as ‘disguised employees.’ In other words, it was designed to stop workers offering their services in a way which allowed them to avoid paying tax and National Insurance.

Under the legislation, it was the responsibility of the contractor themselves to establish their own IR35 status.

However, this changed when HMRC deemed that too many companies were not compliant. As of 2017, in the public sector, it became the responsibility of the client to determine the contractor’s IR35 status.

IR35 in the public sector

When this change was rolled out to the public sector, it meant that many contractors were deemed to be inside of IR35, regardless of their actual circumstances.

This meant that it became the client’s responsibility to deduct the contractor’s tax and National Insurance contributions from their fee before it was paid to them.

The problem here was that public-sector clients weren’t always accurate in their assessments. This led to many contractors paying more in PAYE tax and National Insurance Contributions than they needed to, having a damaging knock on effect to thousands of contractors.

IR35 in the private sector

Although IR35 originally only applied to the public sector, as of April 2021, it is set to be rolled out to the private sector too. Although this was originally meant to come into play in April 2020, it has since been delayed due to the COVID-19 pandemic.

From this point onwards, it will become the responsibility of the client to determine the contractor’s IR35 status, meaning many of the 170,000 limited company contractors are set to be badly impacted.

So, although contractors can currently avoid IR35 by working in the private sector, as of April next year this will no longer be the case.

How to comply with IR35

Inevitably, many contractors that currently work in the private sector are feeling anxious about these changes. After all, it may mean they end up paying more in tax and National Insurance than they need to. What’s more, many larger clients have stated that they will simply stop using the services of limited company contractors altogether.

If you are in a similar boat, there is a way to ensure compliance with IR35 – by working through an umbrella company.

An umbrella company makes the contractor their employee, in turn putting them on their payroll, processing their salary and tax through PAYE and giving them statutory benefits such as holiday pay and sick leave.

As well as offering the contractor these range of benefits, they also have the key advantage of making the contractor exempt to IR35 since they are technically an employee.

Let Umbrella Supermarket help you find the best umbrella company for you

Contracting through an umbrella company has become an increasingly popular way for contractors to operate, combining the benefits and security of employment with the freedom and flexibility of being self-employed.

What’s more, as changes to IR35 prepare to come into motion from next year in the private sector, there’s never been a better time to consider working through an umbrella company.

If you have decided this is the right path for you, the next step is to find the best umbrella company for you.

That’s where our umbrella calculator comes in handy. In just 2 minutes, we help you find the best umbrella company based on your needs and requirements. So, whether you are looking for more money or help with things like childcare credits, we are here to help.

Would you like more information on Public or Private Sector: Will you be impacted by IR35??

Explore More Resources

Using an Umbrella Calculator

The Pros of Using an Umbrella Calculator

There are many advantages to using an umbrella calculator for contractors.

Umbrella calculators allow you to quickly compare thousands of umbrella companies across the UK, offering a clear overview of what you will receive from the company, including everything from your take-home pay, what benefits you will receive, and what services the company will offer.

To help contractors find out more, Umbrella Supermarket outlines the main benefits to using an umbrella calculator in 2021.

umbrella vs limited

Umbrella vs Limited Company: What to know when making the move this new tax year

The 6th April 2021 marked significant changes to IR35 legislation which impacted thousands of self-employed, limited company contractors operating within the private sector.

In light of the changes that have now rolled out, many limited company contractors are understandably considering their options and thinking about making the move to umbrella this new tax year.

To help make the decision that little bit easier, in this guide Umbrella Supermarket outline what contractors need to know about making the move from limited company to umbrella in 2021, to help you get on the right track.

 

umbrella company vs paye

Umbrella Company vs PAYE: What should you choose?

Umbrella company vs PAYE is a question asked by thousands of contractors.

After all, it’s a big decision to make that will have a direct impact on your contracting career and day-to-day life, so it’s not one that should be taken lightly.

To help every contractor make the right decision for them, Umbrella Supermarket has put together this insightful guide outlining the key differences between umbrella and PAYE and the advantages and drawbacks of each.

avoid ir35

How can I avoid IR35?

As a contractor, you will most likely know about IR35 and upcoming reforms from April 2021.

These changes to IR35 legislation are set to badly impact many self-employed contractors in the private sector, so thousands are understandably worried. After all, getting caught out by IR35 can mean you end up paying more in tax than you need at the same level as an employee, without receiving the benefits of being employed, such as statutory rights.

umbrella company costs

Umbrella Company Fees: How Much Should You Pay?

When deciding which umbrella company to work with, the fees they charge will inevitably play an important role in the decision-making process.

Umbrella company fees are taken directly out of the contractor’s income, so it is only natural that contractors want to ensure they are getting a fair deal.

To help contractors understand umbrella company fees, from how they are charged, what they will receive in return, and how much they should be paying, Umbrella Supermarket outlines everything there is to know about umbrella fees in this handy guide.

umbrella vs limited

Pros and Cons of Limited vs. Umbrella

Big reforms to IR35 legislation are set to come into motion from 6th April 2021 which will impact the thousands of self-employed, private-sector contractors out there.

For this reason, many of the contractors that currently operate through a limited company will be considering the umbrella company route as an alternative.

If this is true for you, it’s important to do your research to find out whether limited company vs umbrella is the best option for you in 2021.

To help make the decision that little bit easier, in this guide Umbrella Supermarket outline the key differences between limited vs umbrella, so you can get on the right track.

2021 budget

What Does the 2021 Budget Mean for Contractors?

On 3rd March 2021 Chancellor Rishi Sunak unveiled his Budget in the House of Commons, outlining the government’s tax and spending plans for the year ahead.

Sunak announced a variety of measures he will put into place to help businesses and jobs that have suffered through the pandemic, as well as outlining a plan for the long-term recovery of the economy.

However, the question many contractors will be asking is how the Budget will impact the

umbrella company

5 Benefits to Working with an Umbrella Company

Contracting through an umbrella company has become an increasingly popular option for contractors across the UK in recent years. After all, it is a route that offers contractors a range of benefits over other paths such as working through PAYE or being self-employed.

 

 

ir35 reforms

Contractor’s Guide to IR35 in 2021

From April 6th 2021, reforms to IR35 legislation will come into force, impacting the lives of thousands of self-employed contractors.

Inevitably, contractors across the UK are concerned about upcoming reforms and how these will affect them. To help, in this guide, Umbrella Supermarket look at what these changes to IR35 entail and how they might impact you as a contractor in 2021.

 

compare umbrella company fees

How to Compare Umbrella Company Fees

If you are considering joining an umbrella company in 2021, or have been contracting through one for a while and want to ensure you are getting a good deal, it is important that you know how to compare umbrella company fees.

What you pay in income tax and National Insurance will be the same regardless of which umbrella company you choose, however the fees the umbrella company charges can make a big difference to your take home pay.

At Umbrella Supermarket, we know that every contractor wants to get a fair deal. To help, we explain how umbrella company fees work and how you can compare them to find the best deal.

job retention scheme

Job Retention Scheme for Contractors in 2021

The COVID-19 pandemic has impacted workers across the UK and contractors have been no exception.

Many of the 1.77 million independent contractors have either lost work altogether or have had contracts put temporarily on hold leaving them in a tricky position.

Fortunately, many of these contractors are eligible for the government’s Job Retention Scheme otherwise known as furlough, introduced to offer financial support for businesses and workers. This has been an essential source of income for many who have lost contract work as a result of the pandemic.

As we experience a third national lockdown, the furlough scheme has now been extended until the 30th April. So, if you find yourself out of contract work or have projects on hold, Umbrella Supermarket are here to explain what the Job Retention Scheme is, how it works and what this means for contractors.