A plain-English guide to IR35 for UK contractors: inside vs outside, who decides your status, and what the rules mean for your tax.
IR35 is shorthand for the off-payroll working rules. They are designed to ensure that a contractor who would be taxed as an employee if hired directly cannot reduce their tax bill simply by working through a personal service company (PSC) or other intermediary. If an engagement falls ‘inside’ IR35, the contractor’s income from it is treated as employment income for tax and National Insurance.
Since the private-sector reform in April 2021, the responsibility for determining IR35 status depends on the size of the end client. Medium and large private-sector clients (and all public-sector bodies) must issue a Status Determination Statement and bear responsibility for the decision. From 6 April 2026 the ‘small company’ thresholds were raised — turnover to £15 million, balance sheet to £7.5 million, with the 50-employee headcount unchanged — moving some clients out of scope. Where the end client is small, the responsibility sits with the contractor’s own intermediary.
No single factor is conclusive — HMRC and the courts look at the whole picture. The main considerations are control (does the client dictate how, when, and where the work is done?), substitution (can the contractor genuinely send someone else?), and mutuality of obligation. Financial risk, equipment, and working for multiple clients also matter. HMRC’s Check Employment Status for Tax (CEST) tool gives an indicative view but is not binding.
Where an engagement is inside IR35 and the client is medium or large, the fee-payer (often a recruitment agency) deducts income tax and employee National Insurance before paying the contractor, and the client or fee-payer bears employer’s NI. For contractors now working with newly-small clients, responsibility has shifted back to the contractor’s PSC to self-assess. Getting this wrong can lead to significant HMRC liability.
IR35 status is a question of fact, not contract labelling — a contract that says ‘outside IR35’ means nothing if the working practices tell a different story. If you disagree with a Status Determination Statement, clients operating the rules must run a status-disagreement process. For decisions with material tax consequences, take advice from a specialist tax adviser or solicitor.
Yes. The off-payroll rules introduced for the public sector in 2017 and extended to medium and large private-sector clients in April 2021 remain in force. The main change from 6 April 2026 is that the small-company thresholds were raised, moving some clients out of scope so that determination responsibility shifts back to those contractors’ own PSCs.
The Counsel is an AI legal information tool, not a solicitor, and what it provides is information rather than formal tax advice. It can review your contract and highlight the clauses and working-practice factors most relevant to an IR35 assessment, but a determination you would rely on with HMRC should be confirmed with a qualified tax adviser.
If your end client met the revised small-company thresholds from 6 April 2026, responsibility for determining your IR35 status has shifted to your own intermediary, and you must self-assess for that engagement. It is worth confirming your client’s size formally — you can ask them, and they have 45 days to respond.
The Counsel is an AI tool for England & Wales. It provides legal information, not legal advice, and does not replace a regulated solicitor. For anything high-value or contested, take advice before you act.
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