Contractors who fall inside IR35 will be required to have PAYE and NICs deducted at source from their income. The responsibility for making these deductions will fall to the fee-payer, which will usually be the end-client or the recruitment agency. If you are determined as inside IR35, the fee-payer will deduct the relevant tax and NICs from your fee (net of VAT) before making payment to your limited company.

Another option is to join a compliant umbrella company. The umbrella company becomes the contractor’s employer, paying them through PAYE. Due to the ongoing working arrangements, agencies are more likely to suggest the umbrella company option for contractors. To find out if an umbrella company would suit your needs, read our guide here.