{"id":1761,"date":"2024-06-09T15:12:28","date_gmt":"2024-06-09T15:12:28","guid":{"rendered":"https:\/\/qc_wordpress.dev\/?p=1761"},"modified":"2024-11-04T14:10:59","modified_gmt":"2024-11-04T14:10:59","slug":"inside-ir35-checklist","status":"publish","type":"post","link":"https:\/\/qualitycontracts.co.uk\/guides\/first-time-contractors\/inside-ir35-checklist","title":{"rendered":"Inside IR35 Checklist"},"content":{"rendered":"\t\t<div data-elementor-type=\"wp-post\" data-elementor-id=\"1761\" class=\"elementor elementor-1761\" data-elementor-post-type=\"post\">\n\t\t\t\t<div class=\"elementor-element elementor-element-25006979 e-con-full e-flex lakit-col-width-auto-no e-container e-root-container elementor-top-section e-con e-parent\" data-id=\"25006979\" data-element_type=\"container\">\n\t\t\t\t<div class=\"elementor-element elementor-element-23659ebf elementor-widget lastudio-kit elementor-lakit-breadcrumbs\" data-id=\"23659ebf\" data-element_type=\"widget\" data-widget_type=\"lakit-breadcrumbs.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\n\t\t<div class=\"lakit-breadcrumbs\">\n\t\t<div class=\"lakit-breadcrumbs__content\">\n\t\t<div class=\"lakit-breadcrumbs__wrap\"><div class=\"lakit-breadcrumbs__item\"><a href=\"https:\/\/qualitycontracts.co.uk\/guides\/\" class=\"lakit-breadcrumbs__item-link is-home\" rel=\"home\" title=\"Guides\">Guides<\/a><\/div>\n\t\t<\/div>\n\t\t<\/div>\n\t\t<\/div>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7d277ff7 elementor-widget elementor-widget-heading\" data-id=\"7d277ff7\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h1 class=\"elementor-heading-title elementor-size-default\">Inside IR35 Checklist<\/h1>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4be08c76 elementor-widget-divider--view-line elementor-widget elementor-widget-divider\" data-id=\"4be08c76\" data-element_type=\"widget\" data-widget_type=\"divider.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-divider\">\n\t\t\t<span class=\"elementor-divider-separator\">\n\t\t\t\t\t\t<\/span>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-4ac2635d e-con-full e-flex lakit-col-width-auto-no e-container e-root-container elementor-top-section e-con e-parent\" data-id=\"4ac2635d\" data-element_type=\"container\">\n\t\t<div class=\"elementor-element elementor-element-22bf7935 e-con-full e-flex lakit-col-width-auto-no e-container e-con e-child\" data-id=\"22bf7935\" data-element_type=\"container\" data-settings=\"{&quot;sticky&quot;:&quot;top&quot;,&quot;sticky_on&quot;:[&quot;desktop&quot;],&quot;sticky_offset&quot;:90,&quot;sticky_effects_offset&quot;:0}\">\n\t\t\t\t<div class=\"elementor-element elementor-element-7ebf611 elementor-toc--minimized-on-mobile elementor-hidden-tablet elementor-hidden-mobile elementor-widget__width-initial elementor-widget elementor-widget-table-of-contents\" data-id=\"7ebf611\" data-element_type=\"widget\" data-settings=\"{&quot;exclude_headings_by_selector&quot;:[],&quot;minimized_on&quot;:&quot;mobile&quot;,&quot;headings_by_tags&quot;:[&quot;h2&quot;],&quot;marker_view&quot;:&quot;numbers&quot;,&quot;minimize_box&quot;:&quot;yes&quot;,&quot;hierarchical_view&quot;:&quot;yes&quot;,&quot;min_height&quot;:{&quot;unit&quot;:&quot;px&quot;,&quot;size&quot;:&quot;&quot;,&quot;sizes&quot;:[]},&quot;min_height_tablet&quot;:{&quot;unit&quot;:&quot;px&quot;,&quot;size&quot;:&quot;&quot;,&quot;sizes&quot;:[]},&quot;min_height_mobile&quot;:{&quot;unit&quot;:&quot;px&quot;,&quot;size&quot;:&quot;&quot;,&quot;sizes&quot;:[]}}\" data-widget_type=\"table-of-contents.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-toc__header\">\n\t\t\t<h4 class=\"elementor-toc__header-title\">\n\t\t\t\t\t\t\t<\/h4>\n\t\t\t\t\t\t\t<div class=\"elementor-toc__toggle-button elementor-toc__toggle-button--expand\" role=\"button\" tabindex=\"0\" aria-controls=\"elementor-toc__7ebf611\" aria-expanded=\"true\" aria-label=\"Open table of contents\"><\/div>\n\t\t\t\t<div class=\"elementor-toc__toggle-button elementor-toc__toggle-button--collapse\" role=\"button\" tabindex=\"0\" aria-controls=\"elementor-toc__7ebf611\" aria-expanded=\"true\" aria-label=\"Close table of contents\"><\/div>\n\t\t\t\t\t<\/div>\n\t\t<div id=\"elementor-toc__7ebf611\" class=\"elementor-toc__body\">\n\t\t\t<div class=\"elementor-toc__spinner-container\">\n\t\t\t\t<svg class=\"elementor-toc__spinner eicon-animation-spin e-font-icon-svg e-eicon-loading\" aria-hidden=\"true\" viewBox=\"0 0 1000 1000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><path d=\"M500 975V858C696 858 858 696 858 500S696 142 500 142 142 304 142 500H25C25 237 238 25 500 25S975 237 975 500 763 975 500 975Z\"><\/path><\/svg>\t\t\t<\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-58fcb169 e-flex e-con-boxed lakit-col-width-auto-no e-container e-con e-child\" data-id=\"58fcb169\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-2ea48f33 e-con-full e-flex lakit-col-width-auto-no e-container e-con e-child\" data-id=\"2ea48f33\" data-element_type=\"container\">\n\t\t\t\t<div class=\"elementor-element elementor-element-26720df5 elementor-widget elementor-widget-text-editor\" data-id=\"26720df5\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p class=\"MsoNormal\"><span lang=\"EN-US\">This inside IR35 checklist is for contractors caught by the IR35 legislation who must work through an umbrella company. This checklist assumes that the IR35 assessment has been performed correctly.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ea3d333 elementor-widget elementor-widget-image\" data-id=\"ea3d333\" data-element_type=\"widget\" data-widget_type=\"image.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t\t\t\t\t\t\t<img decoding=\"async\" src=\"https:\/\/qualitycontracts.co.uk\/guides\/wp-content\/uploads\/elementor\/thumbs\/New-Umbrella-company-rules-Hero-image-qnup86u0rezxe2mn5z9z2ka618kt0dkf958o14q3z4.png\" title=\"New-Umbrella-company-rules-Hero-image\" alt=\"\" loading=\"lazy\">\t\t\t\t\t\t\t\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-236b7988 elementor-widget elementor-widget-heading\" data-id=\"236b7988\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Agree Assignment Rate<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-36a7c7cb elementor-widget elementor-widget-text-editor\" data-id=\"36a7c7cb\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Once you accept an inside IR35 contract, you must agree on an <a href=\"https:\/\/qualitycontracts.co.uk\/guides\/umbrella-companies\/umbrella-company-tax-and-pay\">assignment rate<\/a> with the end hirer. The client may have already decided on the assignment rate in advance; however, you&#8217;ll need to negotiate if they haven&#8217;t.<\/p><p>It&#8217;s important to remember that the assignment rate is different to gross pay. It consists of employment costs, the umbrella company&#8217;s margin, and the actual wages payable to you (your gross income).<\/p><p>Given the above, inside IR35 rates are usually higher than outside IR35 rates, although unfortunately, not always by enough to offset the increased tax liabilities. There is no fixed rule, but most contractors ask for a 20% and 30% uplift on their outside IR35 rates.<\/p><p>You can use our <a href=\"https:\/\/qualitycontracts.co.uk\/calculators\/inside-ir35-umbrella-company-calculator\">Inside IR35 (Umbrella Company) Calculator<\/a> to help determine what contract rate you should be asking for.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-eea5827 elementor-widget elementor-widget-heading\" data-id=\"eea5827\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Find An Umbrella Company<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-490ed64 elementor-widget elementor-widget-text-editor\" data-id=\"490ed64\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Once you accept an Inside IR35 contract, you&#8217;ll need to find an umbrella company to work through. There are other methods of working Inside IR35 (agency payroll, client payroll, etc); however, working through an umbrella company is the most common.<\/p><p>Our guide on <a href=\"https:\/\/qualitycontracts.co.uk\/guides\/umbrella-companies\/choosing-an-umbrella-company\">How to Choose an Umbrella Company<\/a> will help you decide which one to go for.<\/p><p>Once you have decided which umbrella company to work through, a contract of employment is signed, effectively making you an employee of the umbrella company for the length of the contract.<\/p><p>Remember, recruitment agencies and end clients often have a preferred suppliers list, an exclusive list of umbrella companies they work with. If you want to work with a particular agency or client, your choice of which umbrella company to use could be restricted.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-e5090b1 elementor-widget elementor-widget-heading\" data-id=\"e5090b1\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Consider Insurance<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-658f359 elementor-widget elementor-widget-text-editor\" data-id=\"658f359\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Unlike Outside IR35 contracts, where you work through a limited company, there are no insurance requirements while working through an umbrella company.<\/p><p>That said, you may want to consider taking out:<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-7d01bc6 elementor-widget elementor-widget-heading\" data-id=\"7d01bc6\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">i) End Client and Umbrella Company Default Cover<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-3893c0e elementor-widget elementor-widget-text-editor\" data-id=\"3893c0e\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>This is designed to cover you for outstanding invoices should your end client or umbrella company go bankrupt or be put into administration while still owing you money.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-385e9ba elementor-widget elementor-widget-heading\" data-id=\"385e9ba\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">ii) Illness and Injury Cover<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-50e6562 elementor-widget elementor-widget-text-editor\" data-id=\"50e6562\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Insurance designed to reimburse you should you fall ill or become injured and be unable to work. As an umbrella company employee, you are entitled to statutory sick pay; however, the allowance is relatively low compared to what most contractors are used to.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4b8d252 elementor-widget elementor-widget-heading\" data-id=\"4b8d252\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h3 class=\"elementor-heading-title elementor-size-default\">iii) Jury Service Cover<\/h3>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-b96cd1b elementor-widget elementor-widget-text-editor\" data-id=\"b96cd1b\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>This insurance compensates you based on your contractual day rate should you be called up to jury service and be unable to work.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-ef3324e elementor-widget elementor-widget-text-editor\" data-id=\"ef3324e\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>There are no legal requirements for you to maintain insurance while working through an umbrella company, so the above are for peace of mind only. All are provided by t<span style=\"font-style: inherit; font-weight: inherit; font-family: var( --e-global-typography-5b62c39-font-family ), Sans-serif; letter-spacing: var( --e-global-typography-5b62c39-letter-spacing ); word-spacing: var( --e-global-typography-5b62c39-word-spacing );\">he <\/span><a style=\"font-style: inherit; font-weight: inherit; font-family: var( --e-global-typography-5b62c39-font-family ), Sans-serif; letter-spacing: var( --e-global-typography-5b62c39-letter-spacing ); word-spacing: var( --e-global-typography-5b62c39-word-spacing );\" href=\"https:\/\/www.ipse.co.uk\/become-a-member\/benefits-overview.html\" rel=\"nofollow noopener\" target=\"_blank\">IPSE<\/a><span style=\"font-style: inherit; font-weight: inherit; font-family: var( --e-global-typography-5b62c39-font-family ), Sans-serif; letter-spacing: var( --e-global-typography-5b62c39-letter-spacing ); word-spacing: var( --e-global-typography-5b62c39-word-spacing );\"> offers as part of its protection benefits.<\/span><\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-58bc37e elementor-widget elementor-widget-heading\" data-id=\"58bc37e\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Consider IPSE Membership<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-d4c1760 elementor-widget elementor-widget-text-editor\" data-id=\"d4c1760\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>While not a necessity, you may want to consider becoming an <a href=\"https:\/\/www.ipse.co.uk\/\" rel=\"nofollow noopener\" target=\"_blank\">IPSE<\/a> member. IPSE is a community that supports the self-employed with advice, contract reviews and other membership benefits. They release news updates, host regular events, and their &#8216;Plus&#8217; membership includes the insurance mentioned in step 3 above.<\/p><p>IPSE Membership is less relevant for Inside IR35 contracts than for outside IR35 contracts, as with inside IR35, you are effectively an employee of the umbrella company for the duration of the contract. You are not considered &#8216;self-employed&#8217;.<\/p><p>That said, joining the IPSE is an excellent way to stay updated with relevant industry news. Costs range from \u00a399 per year for the Essential plan to \u00a3350 per year for Plus.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-a2568ef elementor-widget elementor-widget-heading\" data-id=\"a2568ef\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Consider Your Tax Code<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-bbf6d32 elementor-widget elementor-widget-text-editor\" data-id=\"bbf6d32\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Your personal allowance reduces by \u00a31 for every \u00a32 that your\u00a0adjusted net income\u00a0is above \u00a3100,000, meaning it reduces to zero if your income is \u00a3125,140 or above. HMRC reflect your adjusted allowance in your tax code. A tax code of 1257L reflects the full personal allowance, while 0L reflects no personal allowance.<\/p><p>As a rough guide, a contractor earning \u00a3525 per day, working 220 days per year, and making no pension contributions will breach the \u00a3100,000 threshold.<\/p><p>Although inside IR35 contractors working through an umbrella company will have their taxes deducted at source, ensuring the correct amount of tax is paid remains your responsibility. If you think you will generate more than \u00a3100,000 in taxable income, it is up to you to let HMRC know. The umbrella company will not do this.<\/p><p>You may underpay tax if you don&#8217;t contact HMRC and your tax code is incorrect. If this happens you will face a large lump sum tax bill at the end of the year. You can check your tax code, Personal Allowance and estimated income via HMRC&#8217;s <a href=\"https:\/\/www.gov.uk\/check-income-tax-current-year\" rel=\"nofollow noopener\" target=\"_blank\">online portal<\/a>.<\/p><p>HMRC&#8217;s phone operators are well-versed in discussing tax codes and your options. It&#8217;s best practice to give them a ring and explain your contract rate and how much you think you will earn in the tax year. They will then decide whether your tax code is correct or needs adjusting. If it needs adjusting, they will automatically issue an updated code to your umbrella company.<\/p><p>Many contractors increase their pension contributions to ensure their qualifying income remains below the \u00a3100,000 limit and they receive the total personal allowance.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-4307e04 elementor-widget elementor-widget-heading\" data-id=\"4307e04\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Consider Self-Assessment<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-91e98f7 elementor-widget elementor-widget-text-editor\" data-id=\"91e98f7\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>A question we are often asked is: <em>&#8220;If I&#8217;m working Inside IR35 via an umbrella company, do I need to register as self-employed?&#8221;<\/em>. The short answer to this is: it&#8217;s unlikely.<\/p><p>If your only income in a tax year is paid through an umbrella company, and you don&#8217;t meet any of the criteria outlined in our Self-Assessment Guide, you won&#8217;t be required to submit a self-assessment tax return. However, there are several additional criteria that, if met, mean you will likely be required to submit a self-assessment.<\/p><p>You must submit a self-assessment if you have worked outside IR35 via a limited company during the same tax year as you have been engaged via an umbrella company. Alternatively, if you think you have overpaid tax and are owed a rebate, then submitting a self-assessment is in your interest.<\/p><p>You can use this <a href=\"https:\/\/www.gov.uk\/check-if-you-need-tax-return\" rel=\"nofollow noopener\" target=\"_blank\">tool<\/a> from HMRC to check whether you need to submit a tax return and this tool to register for self-assessment.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-373e958 elementor-widget elementor-widget-heading\" data-id=\"373e958\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Working And Timesheets<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-669ec2b elementor-widget elementor-widget-text-editor\" data-id=\"669ec2b\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>Once you start working, you must provide a timesheet detailing the work hours for each contractually agreed payment cycle (usually weekly). These are typically submitted through an online portal and countersigned by your client.<\/p>\n<p>The umbrella company will invoice the end client directly, the amount being determined by the contractually agreed rate and the number of hours recorded in your timesheets. The umbrella company will then deduct <a href=\"https:\/\/qualitycontracts.co.uk\/guides\/umbrella-companies\/umbrella-company-tax-and-pay\">employment costs<\/a> and their <a href=\"https:\/\/qualitycontracts.co.uk\/guides\/umbrella-companies\/umbrella-company-fees\">margin<\/a> from the amount received.<\/p>\n<p>The remainder (minus any pension contributions) will be paid to the contractor via PAYE. With PAYE, all taxes are deducted at source so there will be no additional administration required. The amount you receive into your bank account will be net of all taxes owed.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-df23223 elementor-widget elementor-widget-heading\" data-id=\"df23223\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Avoid The 60% Tax Trap<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-f1a112f elementor-widget elementor-widget-text-editor\" data-id=\"f1a112f\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>The standard personal allowance is \u00a312,570 per year. However, if your income exceeds \u00a3100,000, this is reduced by \u00a31 for every \u00a32 over \u00a3100,000. What this means in real terms is that, for every \u00a3100 you earn between \u00a3100,000 and \u00a3125,140, you only get to keep \u00a340.<\/p><p>Of the \u00a360 you don&#8217;t keep, \u00a340 is deducted in income tax, and \u00a320 is lost to the taper. As this is an effective tax rate of 60%, it is known as a &#8216;tax trap&#8217;.<\/p><p>Most contractors try to avoid the 60% tax trap by paying more into their pension, reducing their qualifying earnings below the \u00a3100,000 threshold. Not only does this save income tax, it boosts your retirement fund at the same time.<\/p><p>If you want to contribute to a pension, you must decide whether to contribute to a workplace pension or sacrifice salary into a SIPP. Most contractors opt out of the workplace pension and contribute to a SIPP of their choosing. As salary sacrifice reduces income tax and national insurance, it is the best option for those seeking to minimise their tax liabilities.<\/p><p>You must speak to your umbrella company if you want to contribute via salary sacrifice. Given the extra administrative burden, it often comes with supplementary fees, although these are usually minimal.<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-adc3870 elementor-widget elementor-widget-heading\" data-id=\"adc3870\" data-element_type=\"widget\" data-widget_type=\"heading.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t<h2 class=\"elementor-heading-title elementor-size-default\">Build A War Chest<\/h2>\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-2f3fb83 elementor-widget elementor-widget-text-editor\" data-id=\"2f3fb83\" data-element_type=\"widget\" data-widget_type=\"text-editor.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t\t\t<p>A &#8216;war chest&#8217; is a cash reserve that acts as your rainy-day fund, a financial fallback intended for use if your income drops. As a contractor, your income can drop for any number of reasons.<\/p><p>You may be forced to take sick leave. A client could be late paying an invoice. Or, most commonly, you may not be able to find a contract, experiencing a break between assignments. It is a very real possibility that you go for months without work (and income).<\/p><p>If this happens, you must have money put aside to cover your outgoings, particularly if you have dependents like children. Although you should already have a war chest before starting to contract, I recommend topping it up with whatever you can afford when working.<\/p><p>How much is enough? Only you can answer that based on your monthly outgoings. A good rule of thumb is to save enough so that you can survive if you go without income for 6 to 9 months. Although this may sound excessive, the more you save into your war chest, the less stressed you&#8217;ll be when you go through a period without work.<\/p><p>\u00a0<\/p>\t\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-72f1aaa e-flex e-con-boxed lakit-col-width-auto-no e-container e-con e-child\" data-id=\"72f1aaa\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t<div class=\"elementor-element elementor-element-1e7da2fd e-flex e-con-boxed lakit-col-width-auto-no e-container e-con e-child\" data-id=\"1e7da2fd\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-2a366e53 e-flex e-con-boxed lakit-col-width-auto-no e-container e-con e-child\" data-id=\"2a366e53\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-4aa0c16e e-con-full e-flex lakit-col-width-auto-no e-container e-con e-child\" data-id=\"4aa0c16e\" data-element_type=\"container\">\n\t\t<div class=\"elementor-element elementor-element-638518f8 e-con-full e-flex lakit-col-width-auto-no e-container e-con e-child\" data-id=\"638518f8\" data-element_type=\"container\">\n\t\t\t\t<div class=\"elementor-element elementor-element-4974688f elementor-align-left elementor-tablet-align-left elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"4974688f\" data-element_type=\"widget\" data-widget_type=\"icon-list.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/qualitycontracts.co.uk\/guides\/how-to-become-a-contractor\">\n\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\"><b>First Timers<\/b><\/span>\n\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t<\/ul>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-79c25cc6 elementor-align-left elementor-tablet-align-left elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"79c25cc6\" data-element_type=\"widget\" data-widget_type=\"icon-list.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/qualitycontracts.co.uk\/guides\/first-time-contractors\/how-to-become-a-contractor\">\n\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\"><span style=\"font-weight: 400;\">1. How To Become A Contractor<\/span><\/span>\n\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t<\/ul>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-5a6a9de1 elementor-align-left elementor-tablet-align-left elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"5a6a9de1\" data-element_type=\"widget\" data-widget_type=\"icon-list.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/qualitycontracts.co.uk\/guides\/first-time-contractors\/inside-ir35-checklist\">\n\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">2. Inside IR35 Checklist<\/span>\n\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t<\/ul>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<div class=\"elementor-element elementor-element-40be6cc9 elementor-align-left elementor-tablet-align-left elementor-icon-list--layout-traditional elementor-list-item-link-full_width elementor-widget elementor-widget-icon-list\" data-id=\"40be6cc9\" data-element_type=\"widget\" data-widget_type=\"icon-list.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<ul class=\"elementor-icon-list-items\">\n\t\t\t\t\t\t\t<li class=\"elementor-icon-list-item\">\n\t\t\t\t\t\t\t\t\t\t\t<a href=\"https:\/\/qualitycontracts.co.uk\/guides\/first-time-contractors\/outside-ir35-checklist\">\n\n\t\t\t\t\t\t\t\t\t\t\t<span class=\"elementor-icon-list-text\">3. Outside IR35 Checklist<\/span>\n\t\t\t\t\t\t\t\t\t\t\t<\/a>\n\t\t\t\t\t\t\t\t\t<\/li>\n\t\t\t\t\t\t<\/ul>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t<div class=\"elementor-element elementor-element-3f1041ec e-flex e-con-boxed lakit-col-width-auto-no e-container e-root-container elementor-top-section e-con e-parent\" data-id=\"3f1041ec\" data-element_type=\"container\">\n\t\t\t\t\t<div class=\"e-con-inner\">\n\t\t\t\t<div class=\"elementor-element elementor-element-bb5f468 elementor-widget elementor-widget-spacer\" data-id=\"bb5f468\" data-element_type=\"widget\" data-widget_type=\"spacer.default\">\n\t\t\t\t<div class=\"elementor-widget-container\">\n\t\t\t\t\t<div class=\"elementor-spacer\">\n\t\t\t<div class=\"elementor-spacer-inner\"><\/div>\n\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t\t\t<\/div>\n\t\t","protected":false},"excerpt":{"rendered":"<p>Guides Inside IR35 Checklist This inside IR35 checklist is for contractors caught by the IR35 legislation who must work through [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"rank_math_lock_modified_date":false,"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center 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center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[1],"tags":[],"acf":[],"_links":{"self":[{"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/posts\/1761"}],"collection":[{"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/comments?post=1761"}],"version-history":[{"count":24,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/posts\/1761\/revisions"}],"predecessor-version":[{"id":2142,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/posts\/1761\/revisions\/2142"}],"wp:attachment":[{"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/media?parent=1761"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/categories?post=1761"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/qualitycontracts.co.uk\/guides\/wp-json\/wp\/v2\/tags?post=1761"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}