Q. I’m currently contracting a few days a week on a 12-month project. Given I have some spare capacity and bearing in mind that IR35 reform is on the horizon – and with it, an increased risk of being placed inside IR35 by my client – is it worth combining contracting with part-time employment? In other words, can I contract through my personal service company for a few days a week while, at the same time, work the remaining days of the week as an employee? Also, how might working as a contractor and an employee simultaneously impact my tax returns and the amount of tax I pay?
A. Ultimately, it comes down to preference. If you’re worried that you won’t be able to secure an outside IR35 contract for the remaining days of the week or would prefer to enjoy some of the security and benefits that come with employment, you’re well within your rights to split contracting with employment – and many people do combine contracting with a part-time or even full-time job when, for example, thinking about taking the leap into independent working.
If you’re considering working as a part-time employee because you’re unsure of whether you’ll be able to find an outside IR35 engagement when reform arrives next April, it’s worth bearing in mind that at Qdos, we’re confident that outside IR35 roles will continue to exist. In helping private sector firms and recruiters prepare for changes, our work alone suggests tens of thousands of outside IR35 opportunities will be available in 2020 and beyond – despite news that several banks are forcing contractors onto the payroll.
With regards to how working both as a contractor and an employee impacts your tax, it stays separate. By this, we mean that any employment income you receive over the annual personal allowance will be subject to tax and National Insurance deductions – it is your employer’s responsibility to calculate and pay these to HMRC on your behalf.
As you’ll no doubt already be aware, income earned through your personal service company is subject to Corporation Tax, while you’ll also be required to complete your annual self-assessment tax return – just as any self-employed individual must.
This answer was provided by IR35 specialist, Qdos Contractor.
There is a good chance that contractors may do mixture of contracts throughout the year i.e. some within IR35 (getting paid via umbrella company) and others outside IR35 (via limited company). Best to keep limited company and maybe stick with same umbrella company (if possible).