What is inside IR35?
If your contract falls inside IR35, HMRC considers you an employee, and you will be expected to pay National Insurance and income tax like other employees.
What is outside IR35?
If your freelancing contract is deemed to be outside IR35, you will be considered self-employed. This allows you to enjoy the tax efficiency benefits of self-employment but also deal with the associated risks.
Why were IR35 rules introduced?
The IR35 rules were introduced to combat fraudulent claims by contractors. Before these rules were put in place, many self-employed contractors worked as a limited company for a single client to avoid large tax and national insurance bills.
With the new legislation, if the terms of a self-employed contractor's contract closely resemble that of an employee, they may need to become an employee of their client. This would mean that they now pay tax as an employee.
How will it affect my mortgage application?
Determining whether your mortgage application will be affected by IR35 rules is tricky. Different lenders have different criteria, so one bank may accept your application using the value of your contract (day rate) whilst another may treat you as self-employed.
In a nutshell, whether you fall in or out of IR35 it is important to get the right advice. At ams: We have access to every lender and know their criteria like the back of our hand, so “If we can’t help, it’s not possible”