Bookkeeping for Contractors - IR35

IR35 rules determine whether contractors are employees for tax purposes, and that affects how you do your bookkeeping. If you're inside IR35, you pay tax like an employee (PAYE, NIC deducted at source). If you're outside IR35, you operate as self-employed for tax purposes (Self Assessment, expenses, tax relief). Either way, you need proper bookkeeping that accounts for your IR35 status and tax treatment.

The problem is most contractors don't understand how IR35 affects their bookkeeping. Inside IR35 contractors might be tracking expenses they can't claim (because they're taxed like employees), while outside IR35 contractors might not be tracking expenses they can claim (because they're self-employed). That leads to incorrect records, tax errors, or missed deductions.

We handle bookkeeping specifically for IR35 contractors: IR35 status assessment, contractor bookkeeping setup, income/expense tracking, and tax record keeping. Whether you're an inside IR35 contractor in Medway needing bookkeeping that accounts for PAYE taxation, an outside IR35 contractor in Maidstone needing self-employed bookkeeping, or a contractor in Canterbury unsure about IR35 status, we'll set up bookkeeping that's right for your IR35 status. No tax errors, no compliance issues—just proper IR35 contractor bookkeeping.

What this helps you do (fast)

• Understand your IR35 status — Get clarity on whether you're inside or outside IR35 and how that affects your bookkeeping and tax treatment. Know what records you need to keep.
• Track income and expenses correctly — Inside IR35 contractors track income differently than outside IR35 contractors. We'll set up bookkeeping that's right for your IR35 status.
• Claim expenses you're entitled to — Outside IR35 contractors can claim business expenses, inside IR35 contractors have limited expense claims. Proper bookkeeping ensures you claim what you're entitled to.
• Maintain accurate records for HMRC — IR35 contractors need proper records for HMRC compliance. Bookkeeping that accounts for IR35 status ensures records are accurate and compliant.
• Prepare for tax returns — Whether you're inside IR35 (PAYE) or outside IR35 (Self Assessment), proper bookkeeping makes tax return preparation straightforward.
• Avoid tax errors — Understanding IR35 status and tracking income/expenses correctly reduces risk of tax errors or HMRC enquiries.

How it works

Step-by-step process for IR35 contractor bookkeeping:

1. Discovery call — We chat about your situation: whether you've been assessed as inside or outside IR35 (by your client or HMRC), what your contract structure is, whether you work through a limited company or as a sole trader, what your current bookkeeping looks like, and what you're unsure about regarding IR35.
2. IR35 status assessment — We help you understand your IR35 status:
   • Inside IR35 — You're treated as an employee for tax purposes. Tax and NIC are deducted at source (PAYE), and you have limited expense claims. Bookkeeping focuses on tracking income and understanding your tax position.
   • Outside IR35 — You're self-employed for tax purposes. You file Self Assessment, can claim business expenses, and need proper expense tracking. Bookkeeping is similar to sole trader bookkeeping.
   We'll explain what your IR35 status means for your bookkeeping and tax obligations.
3. Bookkeeping setup — We set up bookkeeping appropriate for your IR35 status:
   • Inside IR35 contractors — Track income from assignments (contract income, fees), understand PAYE deductions, track limited expenses (if any), maintain records for HMRC compliance
   • Outside IR35 contractors — Track contract income, track business expenses (travel, equipment, professional fees, etc.), maintain records for Self Assessment, track deductible expenses
   Bookkeeping will be structured correctly for your IR35 status.
4. Income tracking — We set up income tracking:
   • Inside IR35 — Track contract income, understand PAYE deductions, track net income after tax and NIC deductions, maintain records of assignments and income
   • Outside IR35 — Track contract income, track invoice income, track income from different clients/assignments, maintain records for Self Assessment
   Income tracking will be set up correctly for your IR35 status.
5. Expense tracking — We set up expense tracking:
   • Inside IR35 — Limited expense claims (travel between assignments, professional subscriptions if directly related to assignment, etc.). Track expenses carefully as claims are limited.
   • Outside IR35 — Full business expense tracking (travel, equipment, professional fees, home office, training, etc.). Track all business expenses for Self Assessment deductions.
   Expense tracking will be set up correctly for what you can claim based on IR35 status.
6. Record keeping and compliance — We ensure records meet HMRC requirements:
   • Income records — All contract income, assignments, invoices, PAYE information (if inside IR35)
   • Expense records — All business expenses with receipts, invoices, documentation
   • Assignment records — Records of assignments, contracts, IR35 status determinations
   • Tax records — Records for PAYE (if inside IR35) or Self Assessment (if outside IR35)
   Records will be maintained for HMRC compliance.

We work with whatever IR35 status you have—inside IR35, outside IR35, or uncertain. The key is setting up bookkeeping that's right for your IR35 status and tax treatment, so your records are accurate and compliant.

Costs & timelines

Pricing factors:

• IR35 status complexity — Inside IR35 contractors typically need simpler bookkeeping (limited expenses) than outside IR35 contractors (full expense tracking)
• Number of assignments — More assignments mean more income tracking and record keeping
• Expense volume — Outside IR35 contractors with lots of expenses need more detailed expense tracking
• Bookkeeping system — Cloud accounting (Xero, QuickBooks) setup costs more than spreadsheet setup, but provides better record keeping

Commonly reported ranges by local providers:

• IR35 contractor bookkeeping setup: £250–£500 depending on IR35 status and complexity
• Monthly bookkeeping for IR35 contractors: £100–£300/month depending on assignment volume, expense tracking, and IR35 status
• Tax return preparation (separate): £150–£400 depending on IR35 status and complexity (PAYE vs Self Assessment)

Why IR35 contractor bookkeeping costs what it does:

• IR35 status assessment requires understanding IR35 rules and tax treatment
• Bookkeeping setup needs to account for IR35 status (different income/expense tracking)
• Record keeping needs to meet HMRC requirements for IR35 contractors
• Tax return preparation support (PAYE or Self Assessment) depending on IR35 status

Timeline: Setup usually takes 3-5 working days depending on IR35 status and complexity. Once set up, monthly bookkeeping typically takes 1-2 days per month. Tax return preparation is separate and depends on IR35 status (PAYE vs Self Assessment).

Ongoing support: If you want ongoing monthly bookkeeping, that's separate. Typical monthly bookkeeping for IR35 contractors is £100–£300/month depending on assignment volume and expense tracking. Tax return preparation (PAYE or Self Assessment) is separate.

No hidden fees. Bookkeeping setup price includes IR35 status assessment, bookkeeping setup, income/expense tracking setup, and record keeping setup. Monthly bookkeeping and tax return preparation are separate if you want ongoing support.

Kent (UK) focus

We work with IR35 contractors across Kent: inside IR35 contractors in Medway needing bookkeeping that accounts for PAYE taxation, outside IR35 contractors in Maidstone needing self-employed bookkeeping, and contractors in Canterbury needing IR35 status clarity.

Kent contractors face the same IR35 rules as everyone else—IR35 status affects tax treatment, bookkeeping, and record keeping. The difference is when your bookkeeping accounts for your IR35 status, you understand your tax obligations, track income and expenses correctly, and maintain accurate records for HMRC. That's what helps Kent contractors stay compliant and avoid tax errors.

Common Kent contractor scenarios:

• IT contractors — IT contractors in Kent working on assignments, needing IR35-compliant bookkeeping
• Engineering contractors — Engineering contractors needing proper bookkeeping for IR35 status
• Management consultants — Consultants working on assignments, needing IR35 contractor bookkeeping
• Healthcare contractors — Healthcare professionals working as contractors, needing IR35 bookkeeping

Kent contractor market context:

• Kent has many contractors working on assignments (IT, engineering, healthcare, consulting)
• IR35 rules affect Kent contractors, requiring proper bookkeeping that accounts for IR35 status
• Proper IR35 contractor bookkeeping helps Kent contractors stay compliant and understand tax obligations

Remote-first, Kent-focused. We don't need to meet in person (though we can if you prefer), and we understand what Kent contractors are dealing with. IR35 status, tax treatment, income/expense tracking—we'll set up bookkeeping that's right for your IR35 status so your records are accurate and compliant.

FAQs