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A contractor is someone who provides services to a client (usually, a company). Their employment status is either self-employed, or an employee/worker working under an umbrella company.
In most cases, contractors are self-employed and need to file a Self Assessment tax return, but it’s not always the case.
Even if you work for a client, the way you work is quite different to how you might work as an employee or worker. There’s a lot more freedom as a contractor.
For many contractors, you’re liable to pay your own taxes, unless you work for an umbrella company and pay via PAYE.
IR35 is a set of regulations that ensure that people who claim to be contractors are paying the correct amount of tax. It’s live in the public sector but is due to affect those working in the private sector from April 2021.
Off-payroll work – i.e. those who don’t pay tax via PAYE – is a common space for what’s known as disguised employees. These are people who are employees in everything but name, but who pay tax as if they are self-employed. Of course, there are lots of people who are genuinely self-employed, and if this is you, you shouldn’t be affected.
Read more about the IR35 changes here.