12 Benefits of working Outside IR35 - Updated

12 Benefits of working Outside IR35

Outside Spy first summarised the current taxation landscape and the potential advantages of working on contracts deemed to be Outside IR35 back in August last year, but the recent budget announcements meant that an update is now due.


How does it pay to be Outside IR35?

Essentially, the IR35 legislation was constructed to capture those deemed to be “disguised employees” rather than genuine contractors assessed to be operating in business of their own account. This means that by operating outside IR35, contractors have access to the business tax regime applicable to limited companies, rather than the personal/employee tax regime that applies to inside IR35 contracts.

The business tax regime has been constructed to provide incentives for those willing to take the financial risk of operating a business. We have identified 12 potential benefits that are open to you if you work on Outside IR35 contracts and operate your own business;


Paying yourself as a director of your own company – If you work as a contractor through a limited company you will continue to pay corporation tax at 19 per cent on your company profits from April 2023, provided your annual company profits are under £50,000. Companies with profits above £250k will pay the new rate of 25%, and those between £50k and £250k, which will include many contractor PSCs, will now pay tax at the main 25% rate, reduced by a marginal relief. This provides a gradual increase in the effective Corporation Tax rate from 19% to 25% for profits between £50k and £250k. Your business can claim allowable business costs against your tax bill, and can avoid some National Insurance Contributions (NIC) by paying yourself via dividends. One of the main advantages is that your company can pay into a pension scheme on your behalf (such as a SIPP), out of pre-taxed profits, which could effectively shelter up to £50k from tax. As a result, working as a contractor can often be more tax efficient than working via an umbrella company or as an employee of a company, despite the budget tax increases.

Allowing for periods of lower revenue – retaining profits in your company in the good times, to provide a smoothed income in leaner periods. ie you can elect not to take all your contract income as salary in the year that it was earned, so paying less tax than you would as an employee under PAYE

Investing in your company’s services– you can invest in training and certification, subscribing to information services, news portals, or premium content, and attending industry events, thus keeping your skills up to date, being aware of opportunities in the marketplace, and developing the services you offer clients.

Operating as a business capable of securing small public sector contracts –getting on government-approved supplier lists such as the Government’s Digital Marketplace for Cloud hosting, software and support.

Investing in technology – purchasing hardware, software and tools, which can be used to provide development environments and produce productivity gains

Investing in your own projects – you can  create training courses, demonstration software or apps with an eye to future opportunities

Building your company & brand – investing in your own website, marketing materials, building a social media presence, producing promotional/explainer videos etc in order to promote your business expertise and help secure further work

Employing others in the service of your business – this could cover employment of a spouse or children to assist with administrative or development work

Taking on larger pieces of work  – possibly by subcontracting to others, or collaborating with others on projects

Using company profits to invest in other areas – say by investing in buy to let properties, or stocks and shares or cryptocurrency

Providing benefits for yourself – by making provision for life insurance, health insurance, etc

Accessing business finance – taking out loans or overdrafts to fund your growth


As you can see, there are many and varied reasons why the contractor should seek opportunities which are deemed to be “Outside IR35”. 

Outside Spy specialises in finding and distributing all the IT Contracts that have been assessed and advertised as being “Outside IR35”, in one easy to navigate database. Non-subscribers can find a selection of roles on our website, whilst subscribers have full access to the database and unlimited email alerts, for a small monthly fee. Join Outside Spy 

We have created this content for general information purposes and it should not be taken as specific advice; always take professional advice.