Comparing Outside IR35, Inside IR35, and Permanent Wages: How Much Will You Earn?

Table of Contents

1. Introduction
2. Understanding IR35
3. Differences Between IR35, Permanent Employment, and Freelancing
   1. IR35
   2. Permanent Employment
   3. Freelancing
4. Pros and Cons of IR35
   1. Pros
   2. Cons
5. Factors to Consider When Choosing IR35, Permanent Employment, or Freelancing
6. Financial Considerations
   1. Salary Comparison
   2. Benefits and Job Security
   3. Taxes and Expenses
7. Career Progression and Opportunities
   1. Advancement and Growth Potential in Permanent Employment
   2. Flexibility and Diverse Project Opportunities in Freelancing
8. Market Trends and Job Availability
   1. State of the Current Job Market
   2. Impact of IR35 on Job Availability
9. Making the Decision: Inside or Outside IR35
   1. Considerations for Staying Inside IR35
   2. Considerations for Working Outside IR35
10. Conclusion

Understanding the Differences between IR35, Permanent Employment, and Freelancing

In today's episode, we will delve into the complexities of IR35 and discuss the distinctions between IR35, permanent employment, and freelancing. As someone who has been a contractor for over a decade, I have encountered various ways of working as I search for new opportunities amidst the upcoming IR35 changes. In particular, I have noticed an abundance of outside IR35 roles for smaller-sized companies in the London market. However, before you make a decision, it is crucial to consider factors such as the nature of the work, the companies you'll be working with, and the projects you prefer.

Pros and Cons of IR35

IR35, also known as the "intermediaries legislation," has both advantages and disadvantages that you need to be aware of before making a decision about your employment status. Let's delve into the pros and cons of IR35.

Pros of IR35

👍 Enhanced job security: As an employee within IR35, you will enjoy greater job security compared to freelancers. You will have a notice period, which means you cannot be terminated without prior notice.

👍 Opportunity for permanent positions: Inside IR35 roles often align with permanent positions, offering benefits such as holiday pay, sick leave, and training opportunities.

👍 Simplified taxation: Being inside IR35 simplifies your tax situation. You will pay taxes as an employee, without the responsibility of managing your own finances.

Cons of IR35

👎 Lack of freedom and flexibility: Working inside IR35 means you will have less flexibility and autonomy in choosing projects or clients. You will be classified as an employee, and your work will be subject to the control and direction of the hiring company.

👎 Potential financial impact: While you may enjoy enhanced job security and benefits inside IR35, your take-home pay may be lower compared to working outside IR35. Taxes and National Insurance contributions may increase, reducing your overall income.

👎 Limited scope for career progression: Permanent employment within IR35 may limit your opportunities for career growth and progression compared to freelancing, where you have the freedom to take on diverse projects and advance in your field.

It is essential to carefully weigh these pros and cons to make an informed decision about whether IR35 is the right path for you.