If you’re a healthcare professional considering contract work, you may have come across the term IR35. Understanding it is crucial—it can significantly affect your take-home pay and how you manage your taxes.
What is IR35?
IR35 is UK tax legislation designed to determine whether a contractor is essentially working as an employee for tax purposes or genuinely self-employed. Its main goal is to prevent “disguised employment,” where someone works like an employee but pays less tax by calling themselves a contractor.
There are two main categories:
- Inside IR35: You are considered an employee for tax purposes. Income Tax and National Insurance are deducted at source, similar to a permanent employee. While this simplifies tax, it can reduce your take-home pay.
- Outside IR35: You are treated as genuinely self-employed. You have more control over how you pay yourself, often through a limited company, which can make your income more tax-efficient.
Inside vs Outside IR35: What’s Better for Healthcare Professionals?
There’s no one-size-fits-all answer—it depends on your circumstances, preferences, and financial planning:
- Inside IR35 may suit those who prefer simplicity in tax and less administrative work. It’s similar to being employed and provides more certainty around income.
- Outside IR35 can be financially beneficial if you are comfortable managing a limited company or accountant and want to maximise your take-home pay. However, it comes with more responsibility for tax compliance.
How to Decide
When deciding, consider:
- Nature of the Work: Do you have autonomy, set your own hours, or provide services to multiple clients? More independence usually points to outside IR35.
- Contract Terms: Does the contract resemble that of an employee? Fixed hours, supervision, and integration into a team may indicate inside IR35.
- Financial Considerations: Outside IR35 can be more tax-efficient, but you need to handle your own accounting and compliance.
- Professional Advice: Consulting with an accountant or IR35 specialist can give you clarity, especially for healthcare contracts where assignments can vary.
How We Help
At ProfDoc, we work with healthcare professionals and clients offering contracts both inside and outside IR35, depending on your preference. Our recruiters can help you understand your options and find assignments that suit your professional and financial goals.
Tip: Always review your contract before accepting an assignment, and don’t hesitate to ask questions about IR35 status. Knowing where you stand can save you headaches—and maximise your earnings.