With my income, should I work inside of IR35?

[ramholio]

Hi guys,

I guess i'm a relatively low rate contractor at £20 / hour? I've had my contract looked over by SJD (their verbal review,) and they say i'm ok to work outside, ive got my bank account and company formed etc so nearly ready to start trading now.

What I'd like advice on really is whether at this low end of the contractor scale I will actually be at a massive advantage working outside of IR35?

I had been working through an Umbrella and I know I will make a little more take home even if I do work inside IR35 (you can claim 5% expense I believe.)

I intend to be very careful and not risk anything, I enjoy contracting but don't want to play with fire.

What would you do?

[TheFaQQer]

Depends if you want to pay more tax or not.

If you want to take home more money, then you should be outside IR35. If you want to pay more tax, then work inside IR35.

[Gonzo]

I intend to be very careful and not risk anything, I enjoy contracting but don't want to play with fire.

What would you do?

I am a contractor, I take risks and I am quite happy to play with fire. Bring it on I say, I will win.

Obviously I wouldn't play with fire if I thought I might get burned, so I make sure the contract is outside IR35 and I do work in a "contract for services" manner. I am confident that if HMRC did come after me on the IR35 issue they would lose.

Even on £20 an hour, the tax take is going to be significantly more inside IR35 than outside. I think you should work out the difference and then decide whether you think that that amount of cash is worth "the risk".

[ASB]

Assume you bill 34k then this give a salray of approx 31k after Er's NI which yields net 22,600 give or take a touch.

If you are outside IR35 and want to be tax efficient in your remuneration the approximately:-

T/O 34,000
Accountant 1,000
Salary 5,225 [No NI/PAYE]

Profit 27,775
CT 5,277
Post tax profit 22497

If you paid it all as a dividend this leaves you wthy 27725 and you are not in the higher tax band.

5k for peace of mind ? It's your choice.

[puterDude]

You can us the (rather excellent) advanced calculators at http://calculator.contractoruk.com/ - to see how it all stacks up.

Specifically:

Outside IR35: http://calculator.contractoruk.com/ir35-calc.php

Umbrella: http://calculator.contractoruk.com/u...y-tax-calc.php


Sam