What is IR35?

What Is IR35?

IR35 (officially the "off-payroll working rules") is UK tax legislation aimed at contractors who work through a personal service company (PSC) or limited company. It determines whether a contractor's engagement is genuinely self-employed or is "disguised employment" — working like an employee but paying lower taxes by routing income through a company.

Inside vs Outside IR35

Outside IR35: You are genuinely self-employed. You control how and when you do the work, you have multiple clients, you can substitute another person to do the work, and you bear financial risk. You pay contractor taxes (lower).

Inside IR35: The engagement resembles employment — you work exclusively at the client's site, under their direction, with no substitution right. You must pay broadly the same taxes as an employee (higher), even if working through a company.

Who Determines IR35 Status?

Since April 2021, for medium and large private sector clients, the client (not you) determines your IR35 status using a Status Determination Statement (SDS).

For small companies and some public sector engagements, you may still self-determine.

Indicators of Being Outside IR35

The Financial Impact of IR35

Being caught inside IR35 can cost a contractor tens of thousands of pounds annually in additional tax and National Insurance. Getting specialist legal advice on contract wording is worth the investment for long-term engagements.