What is IR35?
IR35 refers to UK tax rules that apply when someone works for a client through their own limited company or intermediary. The rules are designed to make sure workers who would otherwise be considered employees pay the same tax and National Insurance as direct staff. If the contract is ‘inside IR35’, tax is deducted as it would be for an employee. If ‘outside IR35’, the worker is self-employed for tax purposes. IR35 affects contractors and organisations in both the public and private sectors.
Things to know
- IR35 applies across the UK and covers both private and public sectors
- Assessing IR35 status looks at factors like supervision, control and right of substitution
- Businesses may need specialist advice or technology to manage IR35 compliance
- Contractors caught by IR35 pay more tax than those who are ‘outside’ IR35 (e.g. higher tax and National Insurance deductions)
FAQs
What does IR35 stand for?
IR35 is the name of UK tax legislation designed to identify contractors who are working as ‘disguised employees’.
Who decides whether IR35 applies?
In most cases, the organisation hiring the contractor is responsible for determining status and applying the correct tax treatment.
What happens if a worker is inside IR35?
If a workers is ‘inside IR35’, they’re taxed similarly to an employee, with tax and National Insurance deductions made at source.
Does IR35 apply to all contractors?
It applies to many contractors working through a limited company, but status depends on the role and work arrangement.
Why does IR35 matter for business?
Understanding and applying IR35 correctly helps organisations stay compliant, avoid fines, and manage contractor relationships effectively.
