One inside determination does not decide what happens to your company. Under Chapter 10, where the client is medium or large, the fee-payer runs PAYE and employee National Insurance on the payment before your company sees it, funds employer National Insurance at 15% from the same assignment rate, and gets no 5% expenses allowance, because that allowance survives only under Chapter 8. The money arrives already taxed, so the salary and dividend planning you used on outside work does nothing for it. That is a pay cut on one engagement, not a reason to wind up. Keeping the company dormant costs a confirmation statement and a set of dormant accounts. Going umbrella hands over the filings but funds employer NIC at 15%, the Apprenticeship Levy and a margin from the assignment rate, and from 6 April 2026 the agency contracting with the end client is jointly and severally liable for PAYE the umbrella fails to remit. Closing is the route you cannot undo cheaply: strike-off suits reserves up to £25,000, an MVL is needed above that for capital treatment, and Business Asset Disposal Relief at 18% from 6 April 2026 is worth nothing if the two year TAAR recharacterises the distribution as income. As a rough rule, under twelve months inside points to dormant, an open-ended inside role with no outside work in sight points to umbrella alongside a dormant shell, and closing waits until you are actually leaving contracting.
What does the determination actually change?
It changes who calculates the tax and how much of the rate survives, not your legal status. Under Chapter 10 the fee-payer deducts income tax and employee NIC at 8% and 2% from the deemed direct payment, after VAT and the direct cost of materials, and pays employer NIC at 15% plus the Apprenticeship Levy on top out of the assignment rate. Where the client is small or wholly overseas, Chapter 8 applies instead: your company self-assesses a deemed employment payment at year-end and keeps the flat 5% allowance, so two contractors on identical rates can keep different amounts. Home to client travel stops being deductible either way, because each inside engagement counts as a separate employment. You can put your own rate through the inside IR35 take-home calculator, and the deduction order is set out in what an inside IR35 day rate really leaves you.
Should you keep the company trading?
Yes, if any part of your work is still outside IR35, or plausibly will be within a year. A trading company keeps the salary and dividend mix on outside income, keeps temporary workplace travel relief on outside engagements, and keeps the employer pension contribution, the largest lever open to you and untouched by a determination on a different contract. Inside-IR35 income already taxed at source is tracked separately so it is not taxed twice when you draw it. The cost is the overhead: accounts, a CT600, payroll, VAT if registered, and a confirmation statement. With no outside income at all, that overhead buys you nothing.
Is holding the company dormant worth it?
For most contractors, yes, which is why a hasty closure is usually wrong. A dormant company files a confirmation statement and dormant accounts, and that is close to the whole obligation once payroll and VAT are properly closed down. What it preserves is optionality: the name, the trading history, the bank relationship and the ability to pick up an outside engagement without incorporating again. Retained reserves can sit there while you decide. One balance does not go quiet with the rest: a director's loan account left overdrawn nine months and one day past the period end still draws the section 455 charge, at 35.75% where the loan was made on or after 6 April 2026.
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When does closing the company win?
When the reserves are large, the inside position is permanent and you are not going to carry on the same trade. Reserves up to £25,000 can be distributed as capital on a voluntary strike-off. Above that, a Members' Voluntary Liquidation is needed for capital treatment, with a licensed liquidator appointed. The gain can then qualify for Business Asset Disposal Relief, charged at 18% on disposals on or after 6 April 2026 and capped by the £1m lifetime limit. What undoes that for contractors is the winding-up TAAR. Carry on the same or a similar trade within two years of the distribution and the money can be taxed as an income dividend at 10.75%, 35.75% or 39.35% rather than as a capital gain. Moving to an umbrella in the same field is exactly the pattern that condition was written for. The four conditions, the clock and the records to keep are in the winding-up TAAR and the same trade test, which comes before the strike-off or MVL choice.
Does an umbrella beat keeping the company?
On admin, always. On money, only once you count the same deductions on both sides. The umbrella employs you, runs PAYE, pays holiday pay and removes the filings, but employer NIC at 15%, the Apprenticeship Levy at 0.5% of the pay bill and the umbrella's margin are funded from the assignment rate, so an umbrella rate is not comparable with a limited company day rate. Under Chapter 10 the fee-payer is already funding employer NIC, so the real difference is the margin against your company's running cost. Ask for the Key Information Document before signing and treat a promised take-home that looks too good as a marker of a disguised remuneration scheme. The side by side sits in limited company against umbrella for contractors.
Which route fits which situation?
| Route | Fits when | Main cost | Main risk |
|---|---|---|---|
| Keep trading | Some outside work now or within a year | Full filing and payroll overhead | Overhead with no tax benefit if outside work never arrives |
| Hold dormant | Inside for a defined stretch, outside work expected later | Confirmation statement and dormant accounts | Reserves stay locked in until you decide |
| Umbrella, company dormant | Open-ended inside role, admin is the pain point | Employer NIC, the levy and the margin from the rate | Non-compliant provider, narrower agency lists from 6 April 2026 |
| Close | Large reserves, leaving contracting | Liquidator fees above £25,000 of reserves | The two year TAAR turning capital into an income dividend |
How long inside should tip the decision?
Treat expected months inside as the first filter and reserves as the second. Under roughly twelve months, keep the company and let it go dormant if there is genuinely nothing else to invoice. Twelve months to two years with no outside pipeline, an umbrella usually wins on effort while the dormant shell protects the way back. Beyond two years, with no intention of returning to outside work, closing becomes worth pricing, and that is the only point at which the capital route and the TAAR need a full test. None of this is settled until the determination itself has been checked, because a blanket call across a role type is likely to fail the reasonable care test and the client has 45 days to answer your representations. Start with challenging an IR35 determination before you restructure anything, then price each route against your own reserves and expected months inside.