Understanding the Latest IR35 Changes and Their Tax Impact on Consultants with Red & Green Support

The IR35 legislation has long been a critical factor for consultants working through intermediaries, affecting how they manage their tax affairs. Recent changes to IR35 rules have brought new challenges and uncertainties, especially around tax liabilities and compliance. Consultants need clear guidance to navigate these updates effectively. Red & Green offers tailored support to help candidates understand and manage the tax implications of IR35, ensuring they remain compliant while maximising their earnings.

Consultant reviewing tax documents with calculator

What IR35 Means for Consultants

IR35 is a UK tax law designed to identify individuals who are effectively employees but operate through intermediaries such as personal service companies (PSCs). When caught by IR35, consultants must pay income tax and National Insurance contributions as if they were employees, rather than benefiting from the tax efficiencies of running a limited company.

The latest changes have shifted responsibility for determining IR35 status from the contractor to the client or agency in many cases. This shift means consultants must be more vigilant about their contracts and working practices, as incorrect status assessments can lead to unexpected tax bills and penalties.

Key Changes in IR35 Legislation

The most significant update is the extension of off-payroll working rules into the private sector, following their introduction in the public sector in 2017. This means:

• Clients now assess IR35 status for contractors they engage.

  
  

• If a contract falls inside IR35, the fee-payer (usually the agency or client) deducts tax and National Insurance before payment.

  
  

• Consultants lose some control over their tax status and must rely on accurate assessments by clients or agencies.

  
  

These changes have increased the need for clear communication between all parties involved in recruitment and contracting. Consultants must understand how these rules affect their contracts and tax obligations.

How IR35 Impacts Tax for Consultants

When a contract is deemed inside IR35, the consultant’s income is treated as employment income for tax purposes. This means:

• Income tax and National Insurance contributions are deducted at source.

  
  

• Consultants cannot claim certain business expenses that were previously allowable.

  
  

• The overall take-home pay is often reduced compared to contracts outside IR35.

  
  

For example, a consultant earning £600 per day outside IR35 might take home significantly less if the same contract is inside IR35 due to higher tax deductions and loss of expense claims.

Red & Green’s Role in Supporting Consultants

Red & Green specialises in recruitment and provides expert advice to candidates affected by IR35 changes. Their support includes:

• Reviewing contracts to assess IR35 status.

  
  

• Advising on how to structure working arrangements to reduce IR35 risk.

  
  

• Offering guidance on tax implications and compliance requirements.

  
  

• Helping candidates communicate effectively with clients and agencies about IR35.

  
  

This support helps consultants avoid costly mistakes and ensures they understand their rights and responsibilities under the new tax law.

Recruitment consultant explaining IR35 status to candidate

Practical Steps Consultants Can Take

Consultants can take several practical steps to manage the impact of IR35 changes:

• Request a Status Determination Statement (SDS) from clients or agencies to confirm IR35 status.

  
  

• Keep detailed records of working practices that demonstrate independence, such as control over work hours and project delivery.

  
  

• Seek professional advice from recruitment experts or tax advisors familiar with IR35.

  
  

• Review and negotiate contracts to ensure terms reflect genuine self-employment where possible.

  
  

By taking these actions, consultants can reduce the risk of being caught inside IR35 unnecessarily and protect their income.

The Importance of Clear Recruitment Communication

Recruitment agencies play a vital role in the IR35 process. They act as intermediaries between clients and consultants and often handle tax deductions when contracts fall inside IR35. Clear communication from recruitment professionals helps:

• Ensure consultants understand their IR35 status.

  
  

• Facilitate accurate and timely tax deductions.

  
  

• Support compliance with the law while maintaining good working relationships.

  
  

Red & Green’s recruitment team is experienced in managing these conversations, helping candidates feel confident about their contracts and tax position.

Looking Ahead: Staying Informed and Prepared

IR35 rules may continue to evolve, so staying informed is essential. Consultants should regularly review their contracts and working practices and seek advice when needed. Red & Green remains committed to providing up-to-date information and personalised support to help candidates adapt to any future changes.