Contracts and working practices reviewed
Before you sign, because both are what HMRC looks at and only one of them is in the file.
IT and software contractors
One determination is worth more than any tax planning you will ever do
Inside or outside IR35 changes what you keep by roughly £10,800 on a £550 day rate. It turns on how the work is really done, not on what the contract is called — and it is decided before you sign.
What you get
- Contracts and working practices reviewed
- The salary and dividend split recalculated each April
- The 24-month travel clock watched
- Company and personal deadlines in one place
- Your exit planned a year ahead
- One fixed monthly fee
The numbers that decide it
Four figures worth knowing by heart
Four things govern a contractor's position. The first one governs the other three.
IR35The end client decides, unless they are small
15%Employer's NI, off an inside rate first
24 monthsWhen client-site travel stops being allowable
9m + 1dAfter your year end, corporation tax is due
2026/27 figures. See key tax dates and the calculators for the full picture.
Your year
Two calendars, and they do not line up
A company year end in one month and a personal tax deadline in another is how a good year turns into two large bills close together.
Before you signContract and working practices reviewed. The cheapest point at which anything can change.
Your year endEverything company-side is measured from it.
+9 months, 1 dayCorporation tax due.
+9 / +12 monthsAccounts at Companies House, then the CT600.
31 JanuaryYour own Self Assessment, which a contractor almost always needs.
Every renewalStatus re-examined. It attaches to the engagement, not to you.
Source: gov.uk off-payroll working, Corporation Tax and Self Assessment guidance, checked July 2026.
The thing that makes it different
One determination is worth more than any tax planning
For anyone contracting through their own company, IR35 is not one factor among several. It is the factor. Inside, the money is taxed like employment before it reaches you and the company is doing very little for you. Outside, it does a great deal.
Since the off-payroll rules changed, a medium or large end client makes the determination and has to give you a Status Determination Statement explaining it. If the end client is small, the decision stays with your company — and so does the liability if it turns out to be wrong.
The test is about how the work is actually done: control, a right of substitution the client would genuinely accept, and whether either side is obliged to offer or accept more work. Contract wording matters far less than practice, which is why a review before you sign is worth more than an argument afterwards.
The detail that decides it
What actually moves the numbers for an IT contractor
Four of these are about the engagement. The last one is about the day you stop.
- The determination, and who makes it
- Medium and large end clients decide and must issue a Status Determination Statement with reasons. Small clients do not, and the liability stays with your company. Either way the answer is about working practices, not about what the contract is titled.
- Substitution that would actually be accepted
- A substitution clause is evidence only if the client would take a substitute. Where everybody involved knows they would not, the clause is decoration and it will be read that way.
- The 24-month rule
- Travel to a client site stops being allowable once you know the engagement there will exceed 24 months — from the date you know, not the date you pass it. Extensions are what catch people out.
- The salary and dividend split
- The efficient salary moves with the National Insurance thresholds, and a one-person company cannot claim the employment allowance. Last year's number is not automatically this year's.
- Closing the company well
- How the company is wound up decides whether the reserves come out as dividends or as a capital gain, possibly with Business Asset Disposal Relief. It needs planning a year ahead, and it is the most expensive avoidable mistake in contracting.
What the determination is worth
The same £550 day rate, both ways
220 days at £550, inside versus outside
£121,000 for the year. Inside IR35 the employer’s National Insurance comes out of the assignment rate first. Outside, a £12,570 salary with the balance drawn as dividends.
- Contract value
- £121,000
- INSIDE — employer’s NI at 15%, taken off first
- −£15,783
- INSIDE — income tax and employee NI on the £105,217 deemed salary
- −£33,470
- INSIDE — take-home
- £71,747
- OUTSIDE — after corporation tax, salary, employer NI and dividend tax
- ~£82,600
- The determination is worth, roughly
- £10,800 a year
Same client, same work, same day rate. That is why an inside engagement needs a materially higher rate to match an outside one, and why a contract review before signing is the best-value hour in contracting.
Worked through at 2026/27 rates from our own calculators, which follow gov.uk guidance checked in July 2026. An example, not advice — your figures will differ.
What we do about it
The whole contracting position
The split recalculated each April
Against the current thresholds rather than carried forward from last year.
The 24-month clock
Watched on every engagement, including the extensions.
Two calendars in one place
Your company year and your personal tax year, which do not line up and both have to be met.
The exit, planned a year out
Strike-off or liquidation modelled early enough that the choice is still available.
Somebody who knows contracting
Rather than a generalist meeting off-payroll working for the first time on your file.
Questions
What people in this trade ask us
How much does it cost?
A fixed monthly figure agreed in writing after a 30-minute discovery call. For a personal service company the work is fairly predictable — bookkeeping, VAT if registered, a small payroll, year-end accounts, the Corporation Tax return, the confirmation statement and your self assessment — so the quote is straightforward. What moves it is a second company, higher volume, or an inside-IR35 arrangement running alongside. FreeAgent is included, worth up to £330 a year, and there is no hourly charge for asking a question mid-contract.
Can you tell me if I am inside or outside IR35?
We can review a contract and your working practices and tell you what we think. What nobody can do is give you certainty from a questionnaire — status turns on control, the right of substitution, mutuality of obligation, financial risk and how embedded you are with the client. For medium and large private-sector clients and all public-sector bodies, the client issues the determination and you can challenge it. See the IR35 estimator.
How should I be taking money out of my company?
Usually a modest salary around the National Insurance thresholds plus dividends, with employer pension contributions frequently the most efficient route of all — deductible for the company, no National Insurance, and no personal tax at the point of payment. The constraint on dividends is distributable reserves: cash in the bank includes VAT and Corporation Tax that is not yours. Take dividends without reserves and they become a director's loan with a section 455 charge attached. Model it on the salary and dividend calculator.
What can I claim, and what will get challenged?
Equipment, software, professional subscriptions, insurance, accountancy fees, training that maintains existing skills, and the business proportion of home working are all reliably allowable. The area that generates disputes is travel and subsistence: travel to a client site is only business travel while that site is a temporary workplace, and the 24-month rule means it stops being temporary once you expect to be there beyond two years — at which point past claims can be challenged too. Diarise the 24-month point at the start of a long engagement.
Should I close the company if I take an inside-IR35 contract?
Not necessarily, and it is worth taking slowly because restarting is not free. Many contractors run a mix of inside and outside work, and the company still earns its keep where you have outside engagements, retained profit to extract over time or expect the market to move. Making it dormant is usually a better first step than closing it. Closing a company with substantial reserves has its own tax consequences, and a members' voluntary liquidation carries anti-avoidance rules if you restart a similar business within two years.
What about the Flat Rate Scheme and VAT?
Check the limited cost trader rule before assuming the Flat Rate Scheme helps. Contractors typically spend very little on goods, which pushes them onto the 16.5% rate and removes almost all of the benefit that made the scheme popular. Standard VAT accounting is usually better once you factor in equipment, software and accountancy on which input VAT can be recovered. Run both on your actual figures. Registration itself becomes compulsory over £90,000 of rolling twelve-month turnover, which most day-rate contractors cross.
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