Everything you need to know about contracting in 2024
Contracting is a very popular choice for millions of professionals in the UK despite legislation changes, such as IR35, affecting how contractors, freelancers, and the self-employed can operate. We’ve created a short guide to provide an overview of contracting in 2024, how IR35 affects contractors and freelancers and your payment options for each determination. For more detailed information regarding everything you need to know about contracting, please check out our Ultimate Guide to Contracting.
To learn more about Churchill Knight Umbrella and our FCSA-accredited and SafeRec-certified umbrella service, please call our friendly team on 01707 871622.
Overview of IR35
One of the most prominent pieces of legislation that affects UK contractors and freelancers is IR35. IR35 came into effect in 2000, and more recent reforms to the off-payroll working rules in the public and private sectors have significantly impacted the UK’s temporary workforce.
To put it simply, IR35 was introduced by the government to stop ‘disguised employees’ from taking advantage of tax breaks that were not intended for them. If a contractor is outside IR35, they’re genuinely self-employed and can operate as the director of a Personal Service Company (PSC), often referred to as a limited company. This is the most tax-efficient way to operate as a contractor, as they can pay themselves with a combination of salary and dividends. However, if a contractor is inside IR35, they are seen to be operating similarly to permanent employees. Consequently, they must be taxed at source via PAYE and will receive a net salary just like a worker in a full-time position.
Before April 2017, limited company contractors could determine their own IR35 status and pay themselves accordingly. However, from April 2017, off-payroll in the public sector meant the responsibility for determining the contractor’s IR35 status passed to the end-hirer (the contractor’s client). It also became the responsibility of the fee-payer (usually the recruitment agency or umbrella company) to deduct the appropriate tax deductions and pay them to HMRC before making a net payment to the contractor. In April 2021, the government implemented off-payroll in the private sector. The same rules implemented in off-payroll in the public sector are now also applied to the private sector.
Limited company contracting
Limited company contracting is the most tax-efficient way to operate as a contractor, provided you are deemed outside IR35. The changes to off-payroll legislation certainly impacted limited company contractors. However, there are still plenty of assignments that are still outside IR35. As the marketplace adapts and evolves, more organisations will seek highly skilled contractors for niche assignments that will likely be outside IR35.
If you are a contractor operating outside IR35 and looking for a contractor accountant to help you set up a limited company or provide support with your limited company accountancy – our sister company, Churchill Knight & Associates Ltd, could be the perfect option. Over the last 25 years, Churchill Knight & Associates Ltd has provided specialist contractor accountancy to the UK’s temporary workforce and has helped over 25,000 limited company directors with their business.
Churchill Knight & Associates Ltd’s FCSA-accredited accountancy service is designed to provide contractors with precisely what they need as limited company directors. It includes bookkeeping, innovative software, full administrative support, a dedicated account manager, no set-up fees, and more. Please visit their website to learn more about Churchill Knight & Associated Ltd and their dedicated contractor accountancy service.
Using a PAYE umbrella company
Using a compliant umbrella company is a very efficient and compliant way for contractors and freelancers to be paid for assignments inside IR35. Opting to use an umbrella company is the easiest way for temporary workers to get paid compliantly, as all tax and National Insurance Contributions are deducted and paid to HMRC on your behalf.
Registering with an umbrella company can be completed in five minutes, and there are no joining fees or tie-in period. Once registered, you become an umbrella employee and will be paid for the hours you work for your end client. There are also plenty of umbrella company benefits, including employee rights, Same Day Faster Payments, free insurance cover, and more.
Umbrella companies process the payment of their employees using HMRC’s tax system – Pay As You Earn (PAYE). This ensures contractors are taxed legally and compliantly with UK tax law. They’re the perfect option for long-term assignments, as the ongoing administration is minimal once you’ve registered. Because there is no tie-in period, umbrellas are also ideal for limited company contractors who take a short-term ‘inside IR35’ assignment, as they can use the umbrella for the duration of the assignment and leave when they want to return to their limited company.
Every week, Churchill Knight Umbrella processes the payroll of thousands of temporary workers in full compliance with HMRC. We’re proudly accredited by the FCSA and believe this is the best way to showcase our dedication to operating compliantly within our sector.
To provide increased value and transparency for every contractor and freelancer using Churchill Knight Umbrella, we are delighted to be an official SafeRec-certified umbrella company. Every payslip we process for an employee is reviewed by SafeRec’s AI-powered payslip auditing software. All of our employees will be emailed a real-time report every time they are paid, allowing them to check that the payslip and payment are compliant and there are no signs of malpractice.
Contact us today
To find out more about our umbrella payroll service or begin the registration process, please call our friendly team on 01707 871622. You can also complete the short form on our website, and a team member will contact you at a time that suits you.
Check out our newest articles
3 December 2024
Economic Review November 2024
Interested in keeping up to date with the latest economic performance information impacting businesses and…
14 November 2024
How will the rise in Employer’s National Insurance impact umbrella company employees’ take-home pay?
Chancellor Rachel Reeves announced in the Budget 2024 (Wednesday 30th October 2024) that the Employer’s…
7 November 2024
Churchill Knight Group enters exciting new chapter after acquisition
The Churchill Knight Group has been acquired by Magi GJJ – a group of business professionals with extensive…
31 October 2024
Budget 2024: The implications for recruitment agencies and their candidates using umbrella companies
The long-awaited Budget 2024 was delivered by Labour Chancellor Rachel Reeve in parliament on Wednesday, 30th…
31 October 2024
How will the increase in Employer’s National Insurance impact recruitment agencies and umbrella company employees?
On Wednesday, 30th October 2024, Chancellor Rachel Reeves delivered the first Labour Budget in over 14 years.…
30 October 2024
What were the key announcements in the Autumn Budget 2024?
Today (30th October 2024), the Chancellor of the Exchequer, Rachel Reeves, presented Labour’s first Budget in…
22 October 2024
Is it possible for an umbrella company to prove it operates compliantly?
In such a crowded marketplace, umbrella companies must stand out from the competition, but how? Sarah…
8 October 2024
What are the benefits of pension salary sacrifice?
As part of a pension salary sacrifice arrangement, you agree to give up a percentage or fixed amount of your…
2 October 2024
Economic Review September 2024
Our latest article provides an economic review of September 2024. It explores key areas such as the growth of…