As we approach April, there’s more and more coverage of the tax rules around off-payroll working or IR35, which come into affect this year.
If you’re self-employed in the UK, it’s likely that you’ve seen or heard something about this but not necessarily understand what it means for you - and even if you do understand the changes, your clients may not.
This ‘grey’ in both individuals and clients understanding of the changes, and the way in which freelancers are deemed to be inside or outside of IR35 also being fairly subjective, is leading to a large amount of anxiety within the self-employed - with some worryingly large impacts.
The unknown often creates stress, especially when it is something outside of our control, and the new rules mean that clients are responsible for determining whether work is in or outside of IR35 - so it’s not surprising that large numbers of freelancers are worried about what this means for the future of their work.
IPSE reports that over 32% of freelancers are planning to stop contracting in the UK due to the changes, and a study from inniAccounts says almost a third of contractors (31%) complain it is affecting their mental health and causing anxiety.
Whilst we won’t get into the details of IR35 itself here (there are a number of links to brilliant guides we’ve found with more detail), there are four things we wanted to suggest to help mitigate some of the anxiety you might be facing due these these changes.
1/ Get informed
Don’t bury your head in the sand - read up about IR35, understand what the changes are, what it means for you, and what you need to do in order to prepare for it. Take a look at the list of guides below, and speak to a professional if you want to understand it better.
2/ Are you worrying about something you don’t need to?
You might be worrying about something isn’t likely to affect you. Not everyone is required to make a determination on your behalf - if your clients are smaller businesses with under 50 employees or £10m turnover, they don’t need to define your status, so you may be less at risk, and may have less to worry about, and if you’re acting as a legitimate small business, it’s more than likely you are doing everything you should already.
3/ Contracts, Scopes and Agreements.
If you’re working daily without a scope of work, you’re more likely to be within IR35, so agreeing up front what work you’re delivering is one important aspect of showing you’re not an employee. But this approach is beneficial regardless - as you have a clear definition of what you are being asked to do, which protects you from scope creep and your deliverables being challenged. Having good contracts in place which protect you and your work is wise regardless - so use this time to review what paperwork you have in place, and see if you need to add some additional cover.
4/ Financial Resilience
It could be worth looking at putting some financial protection in place for if you’re investigated or discover a new tax demand. Whilst HMRC have said they’ll take a ‘light handed approach’ and there will be no retrospective tax due, unpleasant surprise tax bills are never something to look forward to. Consider some of the products on the market protecting against IR35 investigation and also having business insurance in place can also be helpful to show you’re a legitimate business. It’s also worth taking this time to think ahead for the next few years, regarding your income. Are you overly reliant on a single source of income, or one way of working? Are you putting something aside for any time off (sick pay, holidays, parental leave) or for the end of your career? Take stock now, and start to design something with a little resilience for the future.
For urgent help: Reports of freelancers experiencing thoughts of suicide related to IR35 are of huge concern to us - if you are experiencing any significant worries, feel like you're in immediate danger, or feel like you need someone to talk to immediately, take a look at our Urgent Help page.
For peer support: whilst we are far from experts on tax, we do have a whole host of people in the Leapers community who are experiencing some of the same worries and concerns, so don’t feel you need to do this alone - come and say hello, and we’ll help each other to work well.