IR35 Contractor Tax Guide UK 2026: Inside or Outside IR35?
What is IR35?
IR35 is the name commonly used for the off-payroll working rules. They are designed to assess whether an individual working through an intermediary, such as a personal service company, would look like an employee if the intermediary did not exist.
Inside IR35 and outside IR35
If an engagement is inside IR35, the income is generally treated more like employment income and PAYE and National Insurance may apply. If it is outside IR35, the contractor may have more flexibility over how the company pays salary and dividends, subject to the normal rules.
The label in a contract is not enough. The actual working relationship and the terms of the engagement need to be considered.
Factors that matter
- Who controls what work is done, when it is done and where it is done?
- Does the contractor have a genuine right to provide a substitute?
- Is there an ongoing obligation to offer and accept work?
- Who bears financial risk and provides equipment?
- Can the contractor work for other clients?
- How integrated is the contractor into the client's organisation?
Who makes the status decision?
For many public sector and medium or large private sector engagements, the client decides the status and issues a determination. For a small private-sector client, the contractor's intermediary may need to consider the position. The rules depend on the parties and the size of the client, so identify the decision-maker before accepting an engagement.
How an accountant can help contractors
We can help you organise company records, explain the tax consequences of a determination, check that payroll and dividend records are consistent and plan cash flow. Status decisions can involve employment-law and specialist legal questions, so obtain specialist advice where the facts are disputed or complex.
Do not leave IR35 until your first invoice
Review the engagement, payment route and evidence of how you work before the contract starts.
Frequently asked questions
Does having a limited company mean I am outside IR35?
No. IR35 looks at the working relationship and the engagement, not simply the existence of a company.
Can an accountant decide my IR35 status?
An accountant can help you understand the tax and payroll consequences and organise evidence, but the legal status assessment may need specialist advice.
Can I still work through a company inside IR35?
Often yes, but the tax treatment and administration may be different. Confirm the arrangement with the fee-payer and take advice before accepting the contract.