IR35 targets contractors who work through their own limited company but would be employees if the company were not in the way. Caught ("inside IR35"), the fee is taxed like salary with PAYE and NI; outside it, the normal company tax route applies. Since 2021, medium and large clients decide the status and issue a Status Determination Statement; the contractor decides only for small clients.
Status turns on the reality of the engagement: control over how you work, whether you could send a substitute, and mutuality of obligation. Getting it wrong is expensive for whoever holds the liability. Compare your inside and outside take-home with the IR35 Calculator.
On a £500-a-day contract, an inside-IR35 determination means the fee is taxed like salary through the client or umbrella's payroll, while outside IR35 the contractor's company pays Corporation Tax and the owner draws a salary and dividend mix. The difference in annual take-home commonly runs to 20% or more, which is why status determinations are fought over so hard.
