We understand that tax can be a bind. That's why we're here to do the hard work for you. But as a freelancer or contractor it's good to understand a few of the basics.
Throughout this site you'll see us talking about IR35. It's one tax law that directly affects you as a self-employed worker or contractor. Often referred to as the 'contractors' tax', IR35 came into effect on 6th April 2000 as a means of closing off several tax loopholes.
Before the introduction of IR35, some contractors and freelance professionals avoided paying large amounts of tax and National Insurance Contributions by setting up their own company even though they continued working for their old company. As the sole shareholder and employee, they were able to pay themselves in 'tax light' dividends, therefore avoiding both PAYE and NI contributions unlike other employees - often saving themselves thousands of pounds a year.
This practice is now illegal, with IR35 stating that if an intermediary such as a personal services company, composite company or partnership is being used then the worker should pay tax and NICs like directly employed workers. The Inland Revenue introduced a series of checks to determine the independence of the contractor, or whether they were merely an employee.
Well, if you sign up for either of March Mutual's two service options - our umbrella company PAYEme, or March Mutual GoLTD - it's nothing you need to worry about. Whether you fall inside or outside of IR35, we'll take care of everything.
To find out more about IR35 - and the best option for you to remain legally tax efficient - call us now on 0845 094 4545.