Inside/Outside IR35 comparison

[northernladuk]

I don't understand this: why would being inside IR35 be a positive if your're putting most of it in a pension?

You don't pay tax on the what you put in the to pension so if you put the entire lot in you save the tax.. But it's not as simple as that as you need to live and there are maximums you can put in.

It's an extremely simplistic statement so I wouldn't pay it much heed.

[WordIsBond]

Yeah, way too simplistic.

If you've got a nice big reserve, you can take the normal salary, put the rest in pension, and pay dividends out of the reserve.

If you expect to be outside for the second half of the year this isn't so bad, either.

There's a nice cushion there between the rates that will help cover some of the extra tax you'll pay inside, so it's just not clear here. To say with any certainty, we'd need OP to tell us how much he has retained in his company, how much he needs to take out of it every month to live, how much pension contribution he normally makes, how much he's willing to make to reduce taxation on the contract inside IR35, how much he expects expenses to be per month. Give us all that and we can do the numbers.

Or he could ask his accountant to do the numbers since he's actually paying him for that.

[psychocandy]

...so not an easy thing to do judging by previous discussion. Many variables. I am trying to weigh up £670pd outside (caught by 24 month rule) against £800pd inside. Both can be considered to have equal expenses working away from home base. My initial feeling is that the £800 is not enough but I need to go crunch some numbers. Anyone else have any feedback from a similar decision they've had to make?

35% extra needed I reckon based on a local gig. If travel is a lot inc hotels it'll be more. Thats what happened to me - Inside gig which is 35% more than my normal rate so take home is identical (but its only 15 miles from home).

Why don't you just get a quote from an umbrella for take home and see how that compares? Surely you can work out ltd outside IR35 take home yourself?

[psychocandy]

The inside might be worth about £10-£20 more a day to you, all said and done.

However - if truly 'outside' - you may prefer the autonomy, lack of being 'part of the company', lack of obligation and so on that comes with being 'Outside'

If you think that the inside gig gives you all that too you might want it. If not...

How does being declared inside by the client who are forced down that route by crap government legislation make you "part of the company"? Honestly - these PS organisations carry on exactly as they have before for the last 20 years with regards to permies and contractors - they dont consider you part of the company suddently.

[psychocandy]

you means the 24 month expense rule?

Just ask your client to settle your hotel/travel bills directly for a reduction in your daily rate - job done

What?

[psychocandy]

Take the outside unless you're putting most of it in a pension

Too simplistic. I agree its a good idea to chuck loads in pension (rather than lose almost 50% of it in various NI and tax) but take an inside gig on its merits/take home pay.