Contractors can protect their families with income protection and relevant life cover

The need to protect yourself following the Autumn Budget announcement on IR35

Posted on 16th November 2018 by

IR35 in light of the autumn budget

As a part of the 2018 Autumn Budget, Chancellor Philip Hammond revealed changes to the IR35 tax legislation. It’ll now be rolled out to the private sector, following the reforms made to the public sector in 2017.

From April 2020, medium and large business (those with more than 50 employees) will be responsible for assessing an individual’s employment status and deciding whether they are inside or outside of IR35. If it is determined that the Contractor or independent individual falls inside of IR35, the business that employs them will need to deduct income tax as well as national insurance contributions from their pay.


What does this mean for you?

With these changes taking place, it’s important to understand where you stand as a Contractor.

When IR35 was rolled out to the public sector in 2017 many organisations applied a blanket approach out of fear, choosing to treat all Contractors and independent professionals as regular paid employees working inside of IR35 – avoiding the risk of a fine. This has meant that Contractors were liable to pay the same tax contributions as regular employees, without enjoying the benefits of sick pay or holiday pay that employees are privy to.

[See for commentary on blanket approach and for commentary on who pays what]

With IR35 being rolled out to the private sector, the fear is that Contractors in this sector will be treated in the same way. The impact of this could mean a direct reduction of your net income, as a result of additional tax payments. Contractor Calculator described that this could be by up to 25%.

Beyond the unique financial challenge these changes could mean, it reinforces the need to protect yourself. As described, while being treated as an employee for tax purposes, you won’t receive the benefits a paid employee does. This means it’s up to you to ensure you are protected in the instance of illness and time off work.


How you can protect yourself

Income Protection – If you can’t work, you can’t earn – unless you have Income Protection. Income Protection gives you the peace of mind that, if you were to fall ill, you will still be paid a regular wage and able to keep your finances in order until you are well enough to return to work.

Health Insurance – As a Contractor, your time is money. If you fall ill, the long waiting time at standard NHS services could prevent you from getting back on your feet as quickly as you need to. It is also not guaranteed that they would be able to deal with your conditions. Private Health Insurance will pay for medical treatment, without being placed on a waiting list, and covers you for most medical tests, consultant’s fees and essential surgery if you need it.

Critical Illness cover – As a Contractor, you can only earn money if you’re fit and healthy enough to work. If you sadly experience a long-term critical illness and are unable to work for a significant amount of time, or indefinitely, you’ll want to ensure you can keep you and your family’s heads above water. Critical Illness cover provides a tax-free one-off payment to do just that. It’s important that you work with an adviser who understands your needs, to make sure you get the cover that’s right for you.

Relevant Life’s expert advisers will take time and work hard to understand your unique circumstances and challenges. With that, you can be confident that your health and finances are protected in any situation, whether the changes to IR35 impact you or not.

To find out more about securing yourself tax efficient life insurance, visit our website here.


Related IR35 articles

Contractors concerned about their IR35 status can take steps to protect themselves

Contractors, IR35 and being prepared



The information in this article has not been written by Caunce O’Hara & Co Ltd or any of Caunce O’Hara’s employees. None of the opinions or views contained within this article are Caunce O’Hara’s nor do we accept responsibility for any financial advice given within the article.

Caunce O’Hara & Co Ltd do not provide Life Insurance policies nor advice regarding Life Insurance or accounting and bookkeeping.