IR35 as you're approaching retirement

[MattBCL]

Thought I'd share this... I've found some good (Gov) work which is looking to be inside IR35. I've probably another year or two before I call it a day and retire, so I started looking at whether coming inside IR35 would work for me. Long story short; it does! I figured that if I dropped to 3 days per week, stuffed a load inside my SIPP and just paid NI/Tax on the remainder then I'd not lose much - and that turns out to be the case (I retain 84% between salary and pension contributions) of my gross pay. I used the Giant Pay Calculator to get to this figure.

I share this for others on this forum in a similar position... All the hoo-hah over trying to stay outside IR35 etc... If you're nearing retirement and can afford to direct your earnings into a pension then IR35 becomes a non-issue, because you can funnel your earnings into the pension pre-tax. Even better, I've about 50k of unused pension allowance over the last 3 years, so I'll be working the full 5 days and soaking all that up too, before dropping down to 3 days pw once that's used up. My Gross to Net conversion should be about 90%.

Just putting it out there for others to consider. IR35 is not the death-knell necessarily for those approaching retirement - and - of course - going 'inside' saves a whole lot of worry too. There are also some good rates out there for inside-IR35 roles.

[northernladuk]

Inside works for everyone really, assuming there is a reasonable uplift. It's just some people can't let go of outside moniker and move on. I've been outside 15 years (bar one six month assignment) and was pretty confident I'd stay that way. Looks like I was wrong with 9 out of 10 roles I've applied for being inside. I've done the maths and looked in to it and to tell you the truth I'm actually looking forward to a stint inside now. Can clear up my LTD, get my tax affairs in order and then get a large lump sum in my bank every month without having to worry. No scrimping dividends to try meet tax brackets, bugger around with loans to span the end of year etc. Yeah I'll get taxed to the hilt but so be it. Still a more than comfortable income for a short period of time. If it the next gig is inside and then the next then unfortunate/frustrating but again, hardly putting me on the breadline.

If I'm inside for a long period then maxing the pension pot is a priority although just a word of caution, not every brolly will allow uncapped pension payments. That might change as they realise pensions is the one benefit of an umbrella and they alter their offering to look more attractive. Don't assume stuffing 60k in a year is a possibility and do some research first.

I've also used the Giant Pay Calculator and yes it gives some fantastic returns if you are putting 1000's in the pension but that isn't always possible I don't think.

You make good points but anyone that is open minded to inside gigs should already know this. It's just a shame it will fall on the deaf ears of the outside or die brigade.

There is a downside to all these inside roles, and it's purely a personal one, I'll be much more cutthroat about dumping a gig. I'd never normally do this, stop looking whilst in a gig and see it through but going forward if I do take an inside role on a not so great rate I'm going to keep looking and will be attempting to leave for an outside gig paying more. I don't like doing this but if a client is too lazy to make a proper determination and it's hitting my pocket then I've got to look out for myself. I'm 100% many people are doing the same. Two gigs I didn't get have people starting in two weeks so am sure it's people jumping ship so I'll be joining the party.

[jamesbrown]

Everything you can do with an inside contract, you can also do with an outside contract, plus a lot more. Settling for inside gigs is understandable when that’s what you have available to you - I would too - but working outside IR35 under Chapter 8 is vastly preferable for anyone who can get that work. I wouldn’t touch outside IR35 under Chapter 10, though, which is the majority of outside work, now.

[wattaj]

Inside works for everyone really, assuming there is a reasonable uplift...

That's a pretty bold statement. The numbers might work for you, but I'd be wary of making this generalisation.

[northernladuk]

That's a pretty bold statement. The numbers might work for you, but I'd be wary of making this generalisation.

Fair comment but if you can find a gig with a reasonable uplift going inside for the time being isn't the end of the world for most. It's just a change in the way you pay tax and in theory it's just one gig. I did think many companies were moving back outside and doing their diligence but from my experience this few weeks I was wrong.

[eek]

The issue with inside IR35 contracts is the lack of expenses for travel.

Which means that for me an inside IR35 is fine if I don't need to visit an office, a distinct no-no if the nearest office is a distance away.

[eek]

I did think many companies were moving back outside and doing their diligence but from my experience this few weeks I was wrong.

HMRC have kicked off a round of IR35 checks with end clients and put the fear of God into them...

[northernladuk]

The issue with inside IR35 contracts is the lack of expenses for travel.

Which means that for me an inside IR35 is fine if I don't need to visit an office, a distinct no-no if the nearest office is a distance away.

Indeed although rather surprisingly one of the clients I'm waiting for feedback on will pay travel and overnight accomodation and an agent suggested another is open to some form of remuneration if the right person is a good distance away. Just have to look in to the detail of that if it comes to it and how it pans out with the umbrella.

[wattaj]

Fair comment but if you can find a gig with a reasonable uplift going inside for the time being isn't the end of the world for most. It's just a change in the way you pay tax and in theory it's just one gig. I did think many companies were moving back outside and doing their diligence but from my experience this few weeks I was wrong.

I agree: inside roles are not the end of the world. I think that my issue with them is the potentially devastating impact upon one's tax position; not just for the role, but for the whole year... particularly if, like me, one's taken a great big dividend payment at the start of the tax year.

I'd take one to pad out the pension, but I'd be unlikely to take one for the monthly salary... though things might change.

[northernladuk]

I agree: inside roles are not the end of the world. I think that my issue with them is the potentially devastating impact upon one's tax position; not just for the role, but for the whole year... particularly if, like me, one's taken a great big dividend payment at the start of the tax year.

I'd take one to pad out the pension, but I'd be unlikely to take one for the monthly salary... though things might change.

Ahh that makes a lot of sense in which case you are absolutely right. So yes, I was making a generalisation and not taking people's indivdual tax situation in to account. So yeah, good point.