Better off beight caught by IR35?

[CauliCheese]

I am about to move from a permanent job into my first ever contract, which I expect to be on the doormat when I get home. In the past I had always thought every contractor was better off outside IR35 but, Based on the reading I've been doing the past few days on sites like this one I'm starting to wonder whether pension contributions might outweigh this. So I am hoping someone can advise.

My 12 month contract is for £600 per day and I estimate I'd work 225 days per year, meaning earnings (gross) of £135,000. I plan to pay £16,600 into a pension during the year.

The only other expense I think I can claim is my annual season ticket (about £1,500).

According to the calculator at I'd take home £7,009 per month inside IR35 but £6,646 outside IR35.

Does that sound right?

I appreciate I may have no choice in whether my contract is inside or outside IR35.

I do plan to set up my own limited company.

Thanks in advance,
CauliCheese


Editor's note: Avoid IR35 ('How to' guide by Kate Cottrell)

[Moscow Mule]

Typically, you'll have more expenses than that:

PI & Pub Liab Insurance.
Accountancy fees

There's more you might need to shell out, but these are for starters. Have a look at the guides (links on the right).

[CauliCheese]

... and you mean if I have more expenses then it would tip the balance so that being outside IR35 would be more beneficial? But it's a close run thing because of hte pension contribution?

Just trying to see if I understand it properly.

Thanks, Cauli

[singhr]

So do you want your jam today or your jam at some time in the future once the IFA/Pension Fund/Stockmarket have had a bite out of it and played with it?

[MPwannadecentincome]

doesn't IR35 allow upto 5% expenses, so at that rate its a benefit to you?

[malvolio]

I think someone doesn't understand the concept of dividend payments...

If you get it right, everything you earn above your personal tax-free allowance doesn't incur NICs and a big chunk of it doesn't incur tax. So I suggest you do some more reading and find a better calculator.

You may not be able to establish your IR35 status - nobody can do that outside an appeal tribunal - but you can declare yourself inside if you really want to. Depends how much tax you want to waste propping up this excuse of a government.

Let's just hope you're not getting £600 a day as a BA...

[OrangeHopper]

First contract at £600 per day! What am I doing wrong?

I'm not envious, I'm not envious, I'm not envious .... no doesn't work.

Let me guess the keywords .... London, finance, high volume, low latency ....

Good luck lass.

[TykeMerc]

According to the calculator at I'd take home £7,009 per month inside IR35 but £6,646 outside IR35.

Does that sound right?

Nope that sounds completely backwards.

The whole point of IR35 is that more of your income has to be treated as taxable salary on which you also have to pay employee and employer NI.
If your contract puts you outside IR35 then you can pay yourself partially in Dividend payments which attract a fair bit less tax than a salary.

[MPwannadecentincome]

Nope that sounds completely backwards.

The whole point of IR35 is that more of your income has to be treated as taxable salary on which you also have to pay employee and employer NI.
If your contract puts you outside IR35 then you can pay yourself partially in Dividend payments which attract a fair bit less tax than a salary.

I haven't played with the figures for the tax and NI but 5% of a £135,000 which is £6750 for expenses allowed within IR35 is a lot more than the expenses I am claiming for travel and receipts, so could tip balance on the conventional wisdom?

[pzz76077]

I am about to move from a permanent job into my first ever contract, which I expect to be on the doormat when I get home. In the past I had always thought every contractor was better off outside IR35 but, Based on the reading I've been doing the past few days on sites like this one I'm starting to wonder whether pension contributions might outweigh this. So I am hoping someone can advise.

My 12 month contract is for £600 per day and I estimate I'd work 225 days per year, meaning earnings (gross) of £135,000. I plan to pay £16,600 into a pension during the year.

The only other expense I think I can claim is my annual season ticket (about £1,500).

According to the calculator at I'd take home £7,009 per month inside IR35 but £6,646 outside IR35.

Does that sound right?

I appreciate I may have no choice in whether my contract is inside or outside IR35.

I do plan to set up my own limited company.

Thanks in advance,
CauliCheese

I have to say that I dont understand this IR35 thing you have in the UK.

Either you are in business on your own account or you are a disguised employee, regardless of Ltd Cos etc.

PZZ