IR35 Basics: What It Is and When To Care
IR35 is a set of tax rules for contractors working through limited companies. It tests if you’re really self-employed or an employee.
Key tests
- Control: who decides how and when you work.
- Substitution: can you send someone else.
- Mutuality of obligation: is there guaranteed work and pay.
Why it matters
- Inside IR35: taxed like an employee, less take-home pay.
- Outside IR35: normal contractor tax rules apply.
Example
If you work full-time at one client, same hours as staff, no substitution, HMRC may class you inside IR35.
Actions
- Review contracts.
- Use HMRC CEST tool.
- Get professional review if turnover is high.
- Keep evidence of independence.
Checklist
- Written contracts reviewed.
- Records of multiple clients if possible.
- Proof of substitution rights.
- Seek advice before disputes.