Going interim/contract: can anyone tell me about IR35, Ltd co contracting in general and tax implications etc?

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I may be going interim and I don't understand IR35. So:

• do I need to?
• should I set up a Ltd co?
• or is going through an umbrella co easier?

I'm also confused on rates - a calculator on contractor calculator seems to show one net figure which calculators on this accts site shows me something different and shows a tax rate of 22%

Now, I'm happy to pay 40% tax, that's fine (I do now) but how does this all work? I do need to know the tax implications in order to be sure I'm charging the correct daily rate.

If I assume 40% will that be ok? I.e. if I use the figures from i-resign.com, which has an annual salary calculator, would that be reasonably accurate? Surely I wouldn't pay MORE tax than as a permanent employee? That doesn't seem fair!

When I've been interim before the agent has handled it so it's effectively been PAYE. Any help appreciated, thanks.

I know this is boring but anyone?

Can't help you with the latest info (DP got out 3 years ago as IR35 didn't make it worth our while) but re paying more tax you will pay more NI as you pay both the employees NI and the employers. Making a total of about 20% instead of the 9% you would pay as just an employee.

If DP ever rejoined the contract market we would go for an umbrella company as I certainly don't miss all the paperwork!

Thank you both, oh I see, it's the NI which ups the deductions is it? I#ve skimmed over some stuff on the contractor site which seems to suggest that despite earning a lot more £ gross the net income will be the same as my current perm salary, which definitely would NOT make it worth my while given the loss of holiday/sick pay/other benefits.

I guess I need to find an accountant,

call Les Golding at SJD Accountancy in Liverpool street
He is your man

he talks for England but he is your man

Oh fab, thanks CD.
SueW, it is over that, thanks.

My DH recently became a contractor he is with SJD accountancy too!!

If you go under an unmbrella company the government have brought something in to try and make you personally liable for IR35 rather than the umbrella company. Check this though. In an effort to be supportive I read a very long winded magazine, website is

this for lots of help hopefully

I believe in my little blonde head that IR35 only becomes a problem if you work for the same company for 2 years or more as you are then deemed as "employee" and have to prove otherwise.

SJD were and are brilliant. We have been with them 6 months and they came highly recommended from other contractors.

Ltd company the way to go, I would think.

Lots of expenses off the top too before paying corporation tax.

A good accountant with a fixed monthly rate is great. I think ours is something like £80 a month for a small company.

we're ltd company. our accountant told us to set aside 20% of income for taxes etc... end of year and he'd sort it out, BUT. i am doing things as per IRD and it works out i set aside about 40% of income.

we pay 10.16% income tax, 6.23% employee Ni and 7.25% employer NI (IRD sends a disc which you can work out all this on).

accountant advised paying small amt salary, eg £12k per year, take off expenses, then the rest company profit. then you have Corporation tax at 20% (small business) on profit, leaving an amount for distribution which we transfer to us personally less 22.5% "dividend" tax on that. Plus on ltd you can charge VAT at 17.5% and if you enrol in the flat rate scheme
(assuming eligible), only need to pay the govt 12.5%, so you get to keep 5% instead of putting in for refund of VAT you may have paid out. at end of year we'll let accountant sort out "dividend" taxes and corp tax.

may sound a bit confusing, but i've managed to keep on top of it, barely any paperwork, and once you have a spreadsheet setup, only need to enter in worked hours. PAYE/NI paid monthly, VAT paid quarterly.

we are much better off with DH doing contract. don't worry about hols/sick etc... as your rate should be increased to account for this. (allow about 6 weeks per year to build into rate)

oh and he was umbrella company before, but there was some shakeup and they were going to put him as PAYE so we ditched them. (as he is a genuine contractor)

My DH has just started contracting too and uses SJD accountants, again highly recommended by other contractors.We have set up our own limited company as the accountants said this was better for IR35.
From what I understand of IR35 you can either opt in or opt out. If you opt out you need to have your contracts checked to make sure the wording is spot on to avoid the inland revenue suspecting you are being an employee rather than a contractor. My DH used a company called Bauer and Cottrell to check his contracts, they were really good and sorted all the neccesary changes out so he didnt have to chase any one. Again they came highly recommended by others.
Currently we are drawing a basic minimum wage salary and paying tax and NI quaterly and taking the other money as dividends.
I do all the book keeping side of things for DH and once you've got the hang of it its not too bad, the accountants send you the spreadsheets to complete.

Thank you all for these additional posts, they're really helpful.

I am hoping I'm going to end up taking a perm job rather than a contract but I won't know until the end of this week. This is all very useful advice though.

hello having done this recently i can give you an overview if you like. in/out of ir35 depends on the nature of the work you're doing at the client - regardless of nifty word changes in the contract to make it appear outside ir35. give me a call!

what did you do before, were you a temp employee?

I was interim but through an agent who paid me as PAYE. I don't really need to think about this until the end of this week when I should know whether I'll be doing this or taking a perm job. Eeek.

And thank you BK, I most certainly will call you if I need any other advice on this

good luck!