IR35 is being scrapped: What it means for self-employed trade workers

A lot has changed since we published this article back in September 2022. Here is a quick update.

What has changed?

This morning the new Chancellor, Jeremy Hunt, has used an emergency statement to u-turn on plans to scrap changes to IR35 payroll rules. Hunt, who assumed the role as Chancellor last Friday, said in a statement that the IR35 reforms that Kwasi Kwarteng had planned to scrap, would continue. The Chancellor stated that the government decided to make further changes to the mini-budget. He also said: "We will reverse almost all the tax measures announced in the growth plan three weeks ago that have not started Parliamentary process.

Kwasi Kwarteng, IR35 changes announced on 23 September

Previous Chancellor Kwasi Kwarteng, pledged to simplify the so-called IR35 rules that apply to self-employed individuals such as plumbers, electricians and more working through a company in his mini-Budget. He said that from April 2023, workers in the UK would be responsible for setting their employment status. They would also need to ensure they pay the appropriate amount of tax and national insurance contributions. This meant that the system would revert back to its original rules with freelance workers assessing their own tax.

What is IR35?

HMRC introduced IR35 in 1999. It was designed to curb individuals who behaved in a similar way to employees but with the disguise of a limited company.

Private-sector contractors generally pay less income tax and are exempt from the need to pay national insurance.

Initially, individuals had to determine whether they were covered by IR35. Since reforms in 2017 & 2021, it has been up to the end client to determine the contractor status.

These rules are applicable if you provide your services to a client via a company (your company is called an intermediary). If you were only working for a single client you should pay tax and NI as if you were directly employed, your client should also pay employers' NI contributions. 

We'll post a blog to explain in more detail the new Chancellor's changes.

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