PAYE income and Deemed Payments inside IR35

WorriedContractor

I left my company in May once I got my bonus, so total PAYE earnings this tax year is around £45k.

Since then, I've been contracting with a well-known bank who have decided that all contracts are now inside IR35 - despite assuring me it was outside before I joined! :mad:

I've no idea how to work out the taxes based on the 'deemed payment' .

How does NIC work for example - do I treat the contract income as "one payment" (i.e. the annual amount) so everything about the UEL is at 2%? Or do I work out the equivalent NIC for each invoice and pay 12% up to the UEL and 2% over?

I presume the Employer NIC works the same way? (I have to pay both! :mad:)

For the "equivalent PAYE" (whatever that is!) do I add the £45k to the contract income to my wages to work out the bands? Or even though the rules are designed to pay "similar taxes" are they still officially different and I can at least use £12.5k allowance on my PAYE earnings then the "equivalent allowance" on the "equivalent taxes"?

Any help would be really great.

Pennywise

You really should be getting your accountant to do it. It needs to go through your company's PAYE scheme. You can do it monthly or as a single payment at the end of the tax year (5/4) for payments received under your contract during that tax year. NB it's tax years that matter here, not months or accounting years - it doesn't matter which months you pay it, but it has to be done within the same tax year.

You'll almost certainly need an accountant to do the year end accounts/tax return anyway so to avoid mistakes, get them to explain all this to you and do the Payroll.

WorriedContractor

NB it's tax years that matter here, not months or accounting years - it doesn't matter which months you pay it, but it has to be done within the same tax year.

For NIC the months do matter though?

antrobus

Start by reading this explanation;
https://www.contractorcalculator.co.uk/how_calculate_process_deemed_direct_payments.aspx

TheCyclingProgrammer

Until April it is you who must evaluate your IR35 status, not the client, unless they are in the public sector. Of course having the client make this determination could be detrimental to your case in the event of an investigation.

My understanding is that when the changes come in that they cannot blanket determine everyone as inside IR35.

If you feel confident you could make a case for being outside IR35 and/or have tax investigation insurance then you could continue to operate outside IR35 and leave the contract before the new tax year.

uknick

If you think you should be outside IR35, use the HMRC checker to see if it agrees with your assessment.

https://www.gov.uk/guidance/check-employment-status-for-tax

Pennywise

WorriedContractor wrote: »

For NIC the months do matter though?

No, directors' NIC is calculated on an annual basis.