Answers · UK 2025/26
What is IR35 and does it apply to me?
IR35 (off-payroll working rules) decides whether a contractor working through a limited company is genuinely self-employed or a "deemed employee". Inside IR35 means the engager taxes you like an employee — significantly higher tax and NI. Since April 2021 the engager (not contractor) decides status in most private-sector roles.
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IR35, properly called the "off-payroll working rules", was introduced in 2000 to stop contractors using personal service companies (PSCs) to disguise employment income as dividends and pay less tax. Inside IR35 means the engager must operate PAYE on payments to the PSC — your effective tax rises by 20–25 percentage points versus an "outside IR35" arrangement. Since April 2021 in the private sector (and 2017 in the public sector), medium and large clients are responsible for determining IR35 status and providing a Status Determination Statement (SDS). Small clients (under two of: turnover £10.2m, balance sheet £5.1m, 50 employees) are exempt — the PSC contractor decides their own status. Key tests: substitution (can someone else do the work?), mutuality of obligation, control over how work is done, financial risk, equipment ownership, integration with the client. HMRC's online CEST tool is non-binding. Always get a contract reviewed (e.g. by Qdos, IPSE) before assuming "outside IR35".
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.