To PSC or not to PSC? That is the question

Whether ’tis nobler in the mind to suffer the slings and arrows of IR35 reform, or to take arms against a sea of umbrella companies and, by opposing, end them...

Alright, maybe I am being a little dramatic, but for contractors right now, deciding whether to operate through a Personal Service Company (PSC) or opt for umbrella employment does feel like a Shakespearean dilemma.

As an accountant, I speak to contractors week in and week out. Many of them are trying to make sense of what IR35 means in practice, not just on paper.

They have been told that PSCs are more tax efficient, which is true, but it really is not just about tax anymore.

The £10,000 question

According to HM Revenue and Customs (HMRC’s) latest report, contractors affected by the IR35 reforms are paying an average of £10,000 more per year in tax.

That is a hefty jump, and it’s one that hits hardest when you are still running a PSC but being taxed like an employee.

Some have hoped for a repeal. Others hoped the market would correct itself.

Instead, we are facing the reality of fewer outside-IR35 roles, growing compliance requirements, and as of April 2026, even more regulation for umbrella company payments.

If you are a contractor, you are stuck between a rock and a tax return.

What has actually changed?

Since the IR35 reforms came into force in 2021, the responsibility for determining employment status has moved away from contractors and onto the clients hiring them.

In other words, your end client decides whether your role is ‘inside’ or ‘outside’ IR35, and they carry the risk if they get it wrong.

That has led to what the industry has (not so affectionately) dubbed ‘blanket bans’.

Whole organisations now refuse to engage contractors via PSCs at all, simply because they don’t want to deal with the risk. Instead, they insist on hiring via umbrella companies or PAYE contracts.

So even though a PSC might technically be more tax efficient, it’s no longer your choice to make.

When you add in the extra admin, accountancy costs, and of course the ongoing battle that is staying compliant, a lot of contractors are asking themselves: is it even worth it anymore?

So, to PSC or not to PSC?

The answer now depends on your working setup.

If you are lucky enough to have a client willing to engage you outside IR35, and the contract genuinely supports that, a PSC can still be a smart move.

You retain control, get the tax benefits, and keep that entrepreneurial spirit alive.

However, if you are only being offered inside IR35 roles, then keeping your PSC running might just mean extra costs for no reward.

In that case, it may be worth exploring fixed-term contracts, umbrella companies (with care – some aren’t the most reputable), or even switching up how you work altogether.

My advice?

Don’t make the decision in a vacuum. Speak to an accountant who understands the contractor landscape.

The answer to your Shakespearean dilemma will depend on your risk appetite, your clients, your income, and how much admin you’re willing to take on.

To borrow from another of Shakespeare’s works, ‘Nothing is, but what is not.’

The world of contracting has become so muddied with rules, risks, and shifting responsibilities that what used to be clear-cut no longer is.

So whether you are running your own limited company or considering an umbrella, the important thing is to get advice that cuts through the noise, because what seems tax-efficient or flexible may no longer be once IR35 enters the picture.

For expert advice on this, contact us today, we are here to help you make the right call.

Sam Dale