Inside IR35 for limited company contractors or IT contractors| March 2021 deadline | How it works

The end of March 2021 is a very important deadline for contractors. This is mainly due to the payroll (IR35) changes being rolled out in the private sector.

From 31st March onwards, your clients will decide whether you are inside or outside IR35. Current trends suggest that most employers are likely to classify contractors as being inside IR35.

Here are six key reasons why contractors need to take action before 31st March 2021.

1. Apply for a Mortgage Early

Currently, banks are comfortable working with day rate contractors through limited companies.

Many banks assess contractor income using day rates, multiplied by 46–48 weeks.

Under IR35, most contractors may need to work through an umbrella company or take fixed-term contracts.

Problem: Banks are familiar with contractors using limited companies but less experienced with umbrella structures or fixed-term contracts. This could limit mortgage options.

Solution: If you plan to buy, apply for a mortgage before moving to an umbrella company or fixed-term contract, even if you stay with the same client long term.

2. Limited Company SPV Mortgages

Many contractors hold spare cash within their companies.

Withdrawing this may trigger dividend tax of 32.5% or 38.1% for higher-rate taxpayers.

Alternatives to consider:

• SIPP pensions – offer more control and tax efficiency.
• Property investment via a Special Purpose Vehicle (SPV) – allows you to invest in property more tax-efficiently (avoiding dividend tax and capital gains tax if structured correctly).

📢 Note: The Chancellor has suggested a possible capital gains tax rise. If you’re considering liquidating your company, an SPV property purchase may be a good option.

Again, this may be easier to arrange before 31st March, while you are still outside IR35.

3. Make Use of the Help to Buy Scheme

The Help to Buy scheme changes from 31st March 2021.

After this date, regional caps apply.

Example: Outside London, a £400,000 property may not qualify in certain areas if the regional cap is lower.

The £600,000 limit will only remain in London.

If you’re planning to use Help to Buy, consider applying before 31st March.

4. Settle Help to Buy Early

If you plan to repay your Help to Buy loan within the next 12 months, doing so before 31st March 2021 may be easier.

After this date, working under an umbrella or fixed-term contract could require 12 months’ worth of payslips as proof of income.

Mortgage offers are usually valid for up to 6 months, so acting early gives you flexibility.

5. Take Advantage of the Stamp Duty Holiday

The stamp duty holiday also ends on 31st March 2021.

You can save up to £15,000 if you buy a property worth £500,000.

This is a great opportunity for:

• First-time buyers
• Home movers
• Buy-to-let investors

👉 Contractors may find it easier to buy while still operating through a limited company, so it’s wise to act now.

6. Use the Green Home Grant Scheme

The Green Home Grant Scheme deadline is 31st March 2021.

The government funds up to two-thirds of your costs for making your home more energy-efficient.

This helps you save on bills and reduce your carbon footprint.

Conclusion

The 31st March 2021 is a key date for contractors:

• IR35 rules in the private sector take effect.
• Help to Buy changes.
• The stamp duty holiday ends.
• The Green Home Grant Scheme closes.

If you are a contractor looking to buy or remortgage, your options are likely to be better before IR35 changes take full effect.

With lockdowns slowing down the property process, it’s best to start early.

Contact WIS Mortgages today:

Call: 0203 0111 986

Visit: www.wismortgages.co.uk

Take action now and secure your best mortgage options before the deadline.