IR35 Explained Simply 

Your first invoice as a limited company just went out, when an email lands back from the client's finance team.

Subject line: Status Determination Statement.

Attached there is a PDF that decides how much of that invoice reaches your company account.

The word is either inside or outside, and it comes from a piece of tax law most people know as IR35.

The official name is the off-payroll working rules, and the idea behind them is that if you work through your own limited company but your day-to-day looks like an employee's, HMRC wants you taxed like one too.

Inside vs Outside IR35

If your limited company didn't exist, would you just be their employee?

Inside IR35 means the client treats you as employed for tax purposes. Income Tax and National Insurance come off your invoice before your company ever sees the fee, in roughly the same way they'd come off a payslip.

Outside IR35 means your company is treated as a genuine business in its own right. You still pay Corporation Tax on profits, but you can pay yourself through a mix of salary and dividends, usually the more tax-efficient route for a one-person limited company.

Who makes that call depends on the size of the client.

A public sector body, or a medium or large private company, has to assess your status itself and hand you a Status Determination Statement setting out its reasoning. If your client counts as small, that job falls to your own company instead, using the same questions: how much control the client has over your work, whether you could send someone else to do it, and whether either side is obliged to keep offering and accepting work.

And the definition of small has moved.

For company financial years starting from 6 April 2025, the limits that decide client size both went up:

• Turnover: £15 million, up from £10.2 million
• Balance sheet total: £7.5 million, up from £5.1 million
• Employees: still 50

A company needs to meet two of the three to count as small.

HMRC expects around 14,000 companies to shift from medium to small once the change works through, handing IR35 responsibility for their contractors back to those contractors' own limited companies.

Client size for IR35 purposes is judged year by year, and a company only gets reclassified once it meets the small company definition for two consecutive financial years, with IR35 obligations changing from the start of the tax year after that.

HMRC's own guidance puts the earliest real-world effect at April 2027, even though the £15 million figure is already live.

IR35 status is assessed contract by contract, so a new engagement, a renegotiated scope, or a genuine change in how you work with a client can all reset the answer, even with the same company on the other end. Keep every Status Determination Statement you're given.

If one looks wrong, you are safe to raise it, and the client then has 45 days to respond.

Setting up the limited company itself is admin that starts even earlier. Ampere's online business account is built for that stage: newly registered companies and directors who need a UK account open before the first invoice goes out, with the whole application done from a phone in a five-step signup.

A Status Determination Statement is a small enough attachment to open in seconds and dense enough to read twice. Do that, keep a copy, and the rest of IR35 is mostly a matter of watching which side of that one word your contracts land on.