IR35 remains fully in force. The off-payroll rules still apply in full, and HMRC still expects a status determination for every engagement with a medium or large client. The IR35 changes in the news this month are a political pledge, not law: on 17 September 2026, Shadow Chancellor Andrew Griffith committed a future Conservative government to replacing IR35 outright. Nothing changes until legislation passes. The small-company thresholds increased for financial years beginning on or after 6 April 2025, but this does not mean off-payroll responsibilities changed in April 2026. HMRC states that, for companies with a usual 12-month financial year, 2027/28 is the earliest tax year affected by the transitional provision. The applicable date depends on the client’s accounting period, filing deadline and size tests.
For a broader explanation of how the rules affect contractors and personal service companies, our off-payroll IR35 guide covers the practical tax, status and compliance considerations businesses should understand alongside the latest developments.
Key takeaways
On 17 September 2026, Shadow Chancellor Andrew Griffith pledged that a future Conservative government would replace IR35 rather than simply reform or review it. He said the replacement should give genuinely self-employed people greater control over their status while targeting actual abuse. Conservative leader Kemi Badenoch had already included reforming IR35 rules in a wider package of measures to support businesses announced on 11 September 2026.
Advisers who attended a Conservative Party IR35 policy meeting in November 2025, including Charlie Hemsworth of Bauer & Cottrell and Rebecca Seeley Harris of Re Legal Consulting, have called for greater certainty, clarity and fairness for contractors and organisations engaging them.
Ryan Dawson of Kingsbridge noted that Conservative governments introduced the off-payroll reforms in both the public and private sectors, while Danny Batey of Markel Tax said many clients and contractors would welcome the announcement but cautioned that the detail of any replacement will be important.
The announcement is currently a Conservative opposition policy commitment, not a change in tax law. The existing IR35 and off-payroll working rules remain in force, so contractors and businesses should continue following current HMRC requirements unless the legislation changes.
For contractors asking will IR35 be scrapped, not until the Conservatives return to government and pass legislation, and there is no timetable for either. Three facts are worth holding onto. First, the pledge has no published design yet: what a replacement would look like, who would define employment status and how a replacement would collect tax, all remain open questions.
Second, Andrew Griffith worked at HM Treasury in autumn 2022, when the then government announced a repeal of the off-payroll reforms in the mini-budget and then quietly dropped it.
Third, the rules generate significant revenue for HM Treasury, and the same party that now promises wholesale replacement introduced the reforms in April 2017 and April 2021. Advisers and contractors are right to treat this as a signal of intent rather than a settled plan.
Today, the same rules apply. Where the end client is medium or large, the client decides whether the engagement falls inside or outside IR35 and must give you a status determination statement. If the role is inside IR35, the fee-payer operates PAYE: you pay income tax and employee National Insurance as an employee would, and the employer National Insurance charge sits on top, which is why blanket inside determinations push day rates down. The 5% allowance does not apply to engagements covered by the off-payroll rules for medium and large clients. IR35 tax treatment does not, by itself, give you holiday pay, sick pay or other employment rights.
Where the end client qualifies as small and is outside the public sector, the client-led off-payroll rules in Chapter 10 do not apply. Your own company remains responsible for assessing IR35 under Chapter 8 and accounting for any tax due. The 5% allowance can remain available when calculating a deemed employment payment for an engagement with a small client outside the public sector.
If you are reviewing whether a limited company remains the right structure for your contracting work, our Limited company vs sole trader calculator can help you compare the potential tax position before making a change. HMRC can still open an enquiry into a small-client engagement, so “the client is small” never means “status does not matter”.
The small-company thresholds increased for financial years beginning on or after 6 April 2025. The size tests are annual turnover of £15 million or less, a balance sheet total of £7.5 million or less, and 50 or fewer employees, with at least two of the three conditions met. The employee limit is unchanged. The accounting threshold change is not an automatic change to off-payroll responsibilities from April 2026.
The turnover and balance sheet limits increased by 50%, but off-payroll timing also depends on the relevant financial year, the deadline for filing accounts and the two-year size test. The transitional provision allows the new thresholds to be applied to the previous financial year when determining size. According to HMRC guidance on the size-threshold changes, 2027/28 is the earliest affected tax year for a company with a usual 12-month financial year. Do not assume that a client has already left Chapter 10: confirm its size and the effective tax year before changing status or payroll arrangements.
Plan for the rules in force, not the pledge. Four actions cover most contractors:
If you operate outside IR35, the salary-and-dividend split remains the core of the structure. Our guide to the best salary and dividend split for directors in 2026-27 sets out the current thresholds.
Apex Accountants works with contractors every day on exactly these issues: reviewing status determinations and contracts before you sign, setting the right salary and dividend structure for an outside-IR35 engagement, and keeping your personal service company’s records enquiry-proof. If a client has moved you onto a determination you disagree with, or you want a second opinion on whether a role is genuinely outside, our contractor accounting team can review the position with you. You can also contact us to discuss the specifics of your engagement.
For anyone asking which government brought in IR35, the original intermediaries legislation was introduced in April 2000 under the Labour government. The later off-payroll reforms shifted status responsibilities to public-sector clients in 2017 and medium and large private-sector clients in 2021. .
For an engagement covered by Chapter 10, the fee-payer deducts income tax and employee National Insurance through PAYE and accounts for employer National Insurance. The 5% allowance is not available for these engagements. It can remain available under Chapter 8 for qualifying engagements with small clients outside the public sector, as explained in HMRC’s guidance on the 5% allowance. Being inside IR35 for tax does not, by itself, confer employment rights.
Yes. Where a role is genuinely self-employed, medium and large clients can still determine it as outside IR35. For a qualifying small client outside the public sector, your company assesses IR35 under Chapter 8 instead. Keep evidence of substitution, control and financial risk in case HMRC asks.
No. The September 2026 pledge to replace IR35 is an opposition commitment with no published timetable or legislation. The off-payroll rules apply exactly as before until any new law takes effect.
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