What is IR35?

IR35 is the name given to a tax legislation that is aimed at identifying individuals who are avoiding paying the tax that they should be. The IR35 legislation specifically challenges those people who supply their services to clients via their own company, often known as a ‘personal service company’, be it a limited company or a limited liability partnership, who, in the ever-watchful eyes of HMRC, should be classed as ‘disguised employees’. This means that HMRC do not recognise the contractor in question as ‘self-employed’ from a taxation perspective and therefore they should be taxed the same way that a permanent employee should be, thus falling insider what is called IR35.

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My experience

To be fair, I've only had one contract that was inside IR35 and after a brief Twitter conversation I decided to write a blog post about my experienvce working an inside IR35 contract and why I decided it's not for me and pushed me back to peermanent employment.

Umbrella companies

The biggest issue I had was finding a good umbrella company - you have to do your research, including looking at companies house and checking their accounts. If they haven't updated their accounts in a while, then something may not be right. Remember they get your money take a cut and then pay you - if they are having money problems, they may not be able to pay.

Also, checkout umbrella company reviews on contractor websites. This article on IT Contracting - Umbrella company reviews – can they be trusted? has a lot more information on what you should look at when researching umbrella companies.

You will need to find contracts that pay at least £100 per day more than your usual day rate if you want your take-home pay to be the same as an outside IR35 contract. When looking for an umbrella company, one of the main questions you'll want to get an answer to is - what is the take-home pay?

Not all recruitment agencies will let you just choose any Umbrella company - it will likely have to be one from a list of approved companies. I had a list of twenty to choose from - but the one that was highly recommended to me was not on that list.


Umbrella companies have to automatically enrol you into a pension after three months - not something I needed as I already had a private one - but they still did it and I had to cancel it and chase get back two payments back.

Some umbrella companies allow you to pay your pension contributions into an existing pension, including a SIPP (Self-invested Personal Pension) if you have one - you need to check if they do this and you need to tell them before they auto-enrol you onto their one. If you have a SIPP, make sure they can pay your contributions into it.


Your accountant may charge you more to be able to help with an inside IR35 contract if they normally just deal with your business accounts and not personal - since your earnings will be paid into your account and not your business account. Mine didn't and was very helpful.

Multiple employments

You can have more than one employment - you're employed by your own limited company as well as by the umbrella company but this means you won't have a P45 to give to the umbrella company - this is fine - but you may end up on the wrong tax code or the emergency tax code - which means you'll pay a lot more tax. Speaking with my accountant it was easier to just end my employment with my own company so that I could get a P45 instead of risking it.


If you normally pay yourself a salary from your limited company - then that will need to stop if you're no longer employed by them (you), but if you choose to stay employed with your company then be aware that you'll pay more taxes because you'll be earning more.

In the three months, I was in a contract - I only 4 weeks where my pay was the same. And once my tax code was changed at HMRC but no one knew why. In the 5 years, I've been self-employed that has never happened.


I had to complete three timesheets a week - the recruitment agency, the umbrella company and one for the client.

Just my experience

By the way, these are just my observations based on my short experience and research. Please speak to your accountant and/or a professional who specialises in IR35 regulation.

Is an inside IR35 contract right for you?

My advice is to try it and find out for yourself. After reading this you'll have more information and hopefully know more about what to expect. It's what I decided to do, I had only heard negative things about inside IR35 contracts and with more and more contracts being inside - I needed to see what it was like for myself.

Not just inside IR35 contracts

Some recruitment agencies will need proof that a contract is in fact outside the IR35 scope as stated by the client and this means you may need to pay a third party company, arranged by the recruitment agency, that will check whether the contract is or isn't outside IR35. Not sure if this is the same with all agencies, but I had to pay for this service - luckily the client was happy to pay this fee - as I wasn't happy to fork out the £80 for the privilege.

IR35 Insurance

There is tax investigation insurance for IR35. It also covers your compliance with regulations relating to national insurance contributions or VAT amongst other things. However, the spotlight right now is on IR35. This is not a sponsored link - but I have Professional indemnity insurance from WithJack and I found they now do tax investigation insurance as well.

Checkout WithJack insurance

That's it

I hope you found this post useful if you are currently considering a contract inside IR35. Do let me know if you have had a different experience.

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