If you’re contracting through your own limited company (PSC) it's likely that your end client is responsible for determining your IR35 status. IR35 status. The decision, and the risk, lie with them but that doesn’t mean you should have no input at all. See our advice on influencing public sector IR35 decisions

But what happens if you find yourself accepting that your current role is now deemed to be inside IR35?

If you've been trading outside IR35, but your new contract is now deemed to be inside, you will notice a substantial difference in your take home pay, and before accepting the role you may want to negotiate an uplift to the rate.

Since the fee payer now has to deduct tax and NI, you might decide to move to an Umbrella model where you will also receive full employment rights.

Whether you continue trading through your limited company, or switch to umbrella employment, if you're inside IR35, you will notice a substantial difference in your take home pay.

Comparison of Take Home Pay

Agencies often quote a “Limited Company rate”, paid to contractors operating through their own Limited company or via an Umbrella Company. For those operating through a Limited company, outside of IR35, your take home can be planned tax efficiently to take advantage of the lower tax and NIC rates on dividends and the tax-free allowance for dividends of £2,000 (2022/23). These tax planning opportunities are not available in Umbrella where the rate paid has to cover all employment costs:

• Gross Pay

• Employers NIC

• Auto-enrolment costs

• Apprenticeship levy

• Umbrella Company margin

So, if you are switching to Umbrella because your contract has been deemed to be inside IR35, you might want to negotiate an uplift to your rate to ensure your take home pay is not reduced.

In the examples given above, the uplift needed is between 17% and 20% of the day rate. The £350 a day role needs to increase to £410 per day, in order for take home pay to be comparable at £5,200 and the role on £200 per day needs to increase to £240 a day to retain a take home of £3,329.

The message is clear – if you want to retain take home you need to ask for a rate increase. Obviously, there’s no guarantee that this is possible, but if you don’t ask, you’ll never know.

We are seeing some high levels of success with Contractors negotiating increased pay rates in order for them to remain on the contracts in question. Many end clients just can't afford to see good skills and exceptional talent disappear.

To find out more about how Orange Genie Accountancy could help you, please call 01296 468 185 or email accountancy@orangegenie.com

Why Orange Genie Accountancy?

Orange Genie Accountancy offers fixed fee accountancy packages to contractors and freelancers. Each client has unlimited access to their own dedicated approachable and friendly accountant. All Orange Genie Accountancy accountants are specialists in the contracting market, so they can give you bespoke, high quality advice.

We will always keep you informed about anything that could affect you and your company. Our relationships with our clients are extremely important to us so we'll be in touch often, whether it be face to face, over the telephone or email.

Our packages start at £75 + VAT a month for an online service. Our most popular package is £120 + VAT a month which provides you with your very own dedicated accountant as well as:

• Unlimited accountancy support

• Face to face meetings so we can get to know you and understand your contracting goals

• Proactive contact

• Director and employee payroll

• Annual Return

• Self-Assessment Return

• A fully compliant service so you are safe in the knowledge that you are meeting your legal obligations

​And much more, including access to wealth management advice, IR35 reviews and pensions planning.

If you would like to appoint Orange Genie Accountancy as your accountants please either fill out our enquiry form or give one of our friendly expert accountants a call on 01296 468 185 or email accountancy@orangegenie.com.