What will IR35 in the Private sector cost you?
// February 13, 2020
Since the change was announced that the new IR35 rules will extend into the private sector from April 2020, contractors and agencies have been scrambling for more information.
Contractors are justifiably concerned about how this legislation might impact their take home pay, and if they will be able to continue to be paid through their limited companies in the new tax year.
For agencies, the challenge is to evaluate alternate methods of payment for assignments that have been deemed to be inside IR35, and to communicate this change to a contractor base who will primarily view this as bad news.
The good news is that it doesn't need to be that bad, if you plan.
Have you been told that your assignment is inside IR35 and that you will no longer be allowed to use your limited company or PSC from April 2020?
Using the services of a reputable and complaint Umbrella company seems to be the most popular alternative alongside agency PAYE. Being paid through an Umbrella company certainly has its advantages, both from an employment and tax benefit perspective.
Your take home pay post April 2020
Are you wondering what your take home pay will be through an Umbrella company or Agency PAYE?
This will give you an idea of what to expect and to plan for:
Hours/Days worked -
Hourly/Daily Rate -
Tax brackets are for the 2019/20 Financial year. Employers Costs include Employers NI & the Apprenticeship Levy.
The above table assumes that you;
-are on the standard tax code for the current Financial Year
-have not submitted any business related expenses
-would receive a 15% lower rate on PAYE
Are you still deciding on what course of action to take from April 2020? In addition to the inevitable conversations around pay rates, you are probably considering whether to introduce the services of an Umbrella company or perhaps even put together a PSL. You could also be weighing up the pros and cons of introducing or expanding on your own in-house PAYE.
How can we help?
ESCG represents a number of clients, offering solutions that include PSC, Umbrella and PAYE. We are in a unique position to be able to provide a range of options and have experience of having advised both agencies and contractors when the change to IR35 was implemented in the Public sector in 2017.
If you are a contractor or an agency looking for an Umbrella company or generally looking for a way forward, we have options. If you are an agency and thinking of employing contractors on your own PAYE but don't necessarily want to run a payroll, we can offer you a solution.
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