Will IR35 Be Scrapped? The IR35 Changes and Replacement Pledge Explained

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 change that has already happened is quieter: since April 2026, the widened small-company definition has taken more end clients out of the off-payroll regime, shifting status decisions back to contractors’ own companies.

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

• IR35 still applies in full today. The “replace IR35” pledge is a proposal from the opposition, not a change in the law.
• Shadow Chancellor Andrew Griffith said on 17 September 2026 that a future Conservative government would “replace IR35, not reform it, not review it”.
• The small‑company thresholds widened to £15 million turnover, £7.5 million balance sheet or 50 employees (meeting two of three). From April 2026, this change has been moving more end‑clients into the “small” exemption, shifting IR35 status responsibility back to contractors’ intermediaries.
• Inside IR35, you still pay income tax and National Insurance as an employee, without employee rights.
• What to do now: check every status determination, review your contracts against your working practices, and keep your limited company records clean.

What Is the Latest IR35 News?

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. 

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Will IR35 Be Scrapped?

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. 

What Rules Apply to Contractors Today?

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. You keep a 5% allowance for the cost of running your personal service company, but you receive no holiday pay, sick pay or other employment rights. 

Where the end client is small, the off-payroll rules do not apply at all. Your own company keeps the status decision and remains responsible for the tax, exactly as it did before 2017. 

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”.

What Are the Changes to IR35 From April 2026?

The main changes to IR35 from April 2026 are the widened small-company thresholds. For financial years beginning on or after 6 April 2025, a company qualifies as small if it meets two of three tests: annual turnover of £15 million or less, a balance sheet total of £7.5 million or less, and 50 or fewer employees. 

That is roughly a 50% increase on the previous turnover and balance sheet limits. As companies cross their first accounting date under the new tests through 2026, more of them count as small, and engagements with them leave the off-payroll regime. If you contract for a client that now qualifies as small, your company has taken the status decision back, with both the freedom and the responsibility that brings. Our guide to the latest off-payroll working rules for engineering contractors covers what that means in practice.

What Should Contractors Do Now?

Plan for the rules in force, not the pledge. Four actions cover most contractors:

• Check every status determination. Ask each medium or large client for the determination statement and check that it reflects your actual working practices rather than relying on a standard template. HMRC’s Check Employment Status for Tax tool can also help assess whether an engagement should be treated as employed or self-employed for tax purposes. HMRC says it will stand by a CEST result where the information supplied is accurate and consistent with its guidance. 
• Align contract and reality Substitution, control and mutuality of obligation decide your status. A contract that promises substitution you never perform protects no one.
• Run the numbers before you assume outside is better On an illustrative £60,000 engagement, an inside-IR35 contractor generally takes home somewhere around 60 to 65% of the invoice after PAYE and National Insurance, while an outside-IR35 contractor on a salary-plus-dividends structure commonly lands around 70 to 75% once accounting costs are covered. These are estimates, not advice; our IR35 take-home pay calculator works the comparison on your own figures 
• Keep clean records Timesheets, contracts, determinations and dividend minutes are what settle an enquiry. Good limited-company record-keeping is cheap insurance.

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.

How We Can Help

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.

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Frequently Asked Questions

Which government brought in IR35?

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. .

What happens if I am inside IR35?

The fee-payer deducts income tax and employee National Insurance through PAYE, plus employer National Insurance on top. You keep a 5% allowance for company running costs, but you get no holiday pay, sick pay or employment rights.

Can I still contract outside IR35?

Yes. Where a role is genuinely self-employed, medium and large clients can still determine it as outside IR35, and small clients are outside the off-payroll rules altogether. Keep evidence of substitution, control and financial risk in case HMRC asks.

Is IR35 being abolished this year?

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.