---
title: How IR35 Affects Freelancers in the Creative Industry
description: IR35 can impact how creative freelancers are taxed and paid. Here’s what inside and outside IR35 really mean and how to protect your freelance status.
image: https://esxr.co.uk/hubfs/251121%20IR35.webp
---

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# How IR35 Affects Freelancers in the Creative Industry

![Man at desk with IR35 text behind him](https://esxr.co.uk/hubfs/251121%20IR35.webp)

- November 21, 2025

![Dean Shepherd CTA FMAAT, Chartered Tax Adviser, ~30 years experience](https://esxr.co.uk/hubfs/Dean03.webp)

[Dean Shepherd CTA FMAAT, Chartered Tax Adviser, ~30 years experience](https://esxr.co.uk/blog/author/dean-shepherd)

If you’re a freelancer in the creative world — whether you’re a designer, videographer, editor, sound engineer, animator, copywriter, or anyone making magic behind the scenes — you’ve probably heard the term **IR35** whispered like a creative curse word.

And for good reason.

It’s one of the trickiest, most misunderstood pieces of tax legislation in the UK, and it has a **big impact** on how freelancers structure their work, get paid, and plan their tax.

In this blog, we’ll break down *exactly* what IR35 means for creative freelancers, how it affects day-to-day working, and what you should be doing to stay on the right side of HMRC.

 

 

### **What *is* IR35, really?**

IR35 exists to identify when someone is working like an employee, even if they invoice through a limited company.

HMRC calls this **“disguised employment”** or off-payroll working.

In plain English:

If you *behave* like staff, but you’re *paid* like a contractor, HMRC may say you should be taxed like an employee.

For creatives, this matters because clients often want to bring freelancers “in-house” for long projects… without hiring them as employees. That’s where IR35 comes in.

 

 

### **Why the creative industry is a hotspot for IR35**

Creatives often work:

- On long retainers

- Embedded inside a client’s team

- Using the client’s equipment

- Under the client’s creative direction

- With fixed hours, rounds of amends, and approvals

All of these can make you **look like an employee** rather than a genuinely independent business.

Agencies and production companies are particularly cautious now, which is why you’ve seen more inside IR35 contracts appearing across the sector.

 

 

### **Who decides IR35 status?**

Since April 2021, the rules changed:

##### **Private sector clients**

- **Medium and large businesses** must decide the IR35 status of the engagement, not you.

- They issue a **Status Determination Statement (SDS)**.

- If they say "inside IR35," you’re taxed like an employee (but usually without employee benefits).

##### **Small private sector clients**

If your client is a “small business” under Companies Act thresholds, **you** (the freelancer) still carry the responsibility.

So:  
Creative agencies that are small, boutique studios, micro-production houses… many fall into this category.

 

 

### **What does “inside IR35” mean in practice?**

If your contract is **inside IR35**:

- Your limited company does **not** get the usual tax advantages.

- The fee-payer (client or agency payroll/intermediary) must:

- - Deduct **PAYE tax**

- - Deduct **employee NIC**

- - Charge **employer NIC** (which may reduce the rate offered)

- You receive the payment as a “deemed salary.”

In other words:  
You still operate through your limited company, but **the tax is taken care of before the money arrives**, much like a payslip.

 

##### But here’s the sting

You’re taxed like an employee, **but you don’t get holiday pay, sick pay, pension, or employment rights.**

Inside IR35 is basically PAYE without the perks.

 

 

### **What does “outside IR35” mean?**

Outside IR35 means HMRC agrees you are a genuine independent business.

Your limited company invoices in the normal way, and you decide how you extract the money (salary, dividends, etc.).

Your tax bill is usually lower than inside IR35, and you keep the flexibility and independence that comes with being a freelancer.

 

 

### **Key factors HMRC uses to judge IR35 status**

HMRC doesn’t always care what your contract *says*.  
They look at what *actually happens in real life.*

The core tests:

##### **1. Control**

Who decides how, when and where you work?  
If the client dictates it, that leans towards employment.

##### **2. Substitution**

Could you send someone else to do the work?  
Genuine businesses can. Employees can’t.

##### **3. Mutuality of Obligation (MOO)**

Is the client obliged to give you ongoing work, and are you obliged to accept it?  
If yes, that’s employee-like.

##### **Plus other factors:**

- Using client equipment

- Being part of the team

- Attending staff meetings

- Being managed, reviewed, or appraised

- Being paid weekly/monthly rather than per project

- No financial risk if things go wrong

Creatives often tick more of these boxes than they realise.

 

 

### **How IR35 affects day-to-day creative freelancers**

##### **1. You may be offered more inside IR35 contracts**

Especially with big agencies or broadcasters.

##### **2. Your take-home pay might shrink**

Inside IR35 means PAYE, so less flexibility.

##### **3. You might need to run a mix of inside and outside contracts**

Many freelancers now operate hybrid portfolios.

##### **4. Your limited company accounts get messier**

Inside IR35 income has to be handled correctly to avoid double taxation.

##### **5. Your relationship with your client may change**

Clients sometimes tighten control, push you through payroll companies, or refuse to deal with PSCs entirely.

 

 

### **Practical steps for creatives to protect themselves**

##### **✔ Review your contracts**

Make sure they reflect a genuine business-to-business relationship.

##### **✔ Work project-by-project**

Avoid long, open-ended roles with fixed hours.

##### **✔ Maintain independence**

Use your own equipment, branding, insurance, processes.

##### **✔ Avoid looking like an employee**

Be careful about:

- Team meetings

- Appraisal-style feedback

- Being listed on the website

- Company email addresses

##### **✔ Keep sales, multiple clients, and marketing activity**

These all support genuine self-employed status.

##### **✔ Keep a paper trail**

Especially when a client confirms “outside IR35.”

##### **✔ Get an accountant who understands creative workflows**

Because IR35 is rarely clear-cut and your industry is unique.

 

 

### **Final thoughts: IR35 isn’t the end of freelancing**

Yes, IR35 has made life harder for freelancers.  
But in the creative industry — where flexibility, innovation and project-based work are the norm — you still have plenty of room to operate outside IR35 **if your working practices support it**.

The key is understanding the rules, structuring your business properly, and working with clients in a way that protects your freelance status.

If you’re unsure how IR35 affects your specific setup, I can help you review your position and plan the most tax-efficient approach for your creative business.

---

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