What is IR35?

What IR35 is

IR35 is the common name for the off-payroll working rules. They cover workers, often called contractors, who provide their services through an intermediary. Usually this is the worker's own limited company.

If the worker would be an employee had they been hired directly, the rules make sure they pay broadly the same Income Tax and National Insurance as an employee. People describe this as being "inside IR35". If the rules do not apply, the worker is "outside IR35".

Who it is for

Three parties are usually involved:

• The worker, who does the work.
• The intermediary, usually the worker's limited company.
• The client, the organisation the work is for. There may also be an agency in between.

Who decides if the rules apply

A private sector company is medium or large if it meets 2 or more of these, for financial years starting on or after 6 April 2025:

• turnover of more than £15 million
• balance sheet total of more than £7.5 million
• more than 50 employees

If a client is wholly overseas with no UK connection, the worker's intermediary decides.

What happens if you are inside IR35

The client must give a status determination statement. This sets out their decision and the reasons for it. It goes to the worker and to the party they contract with. Clients must take reasonable care when they decide.

The party that pays the worker's company is called the fee payer, or deemed employer. If the rules apply, the fee payer must:

• take off Income Tax and employee National Insurance from fees paid to the worker's company
• pay employer National Insurance, and the Apprenticeship Levy if it applies, to HMRC

How to check your status

HMRC's Check employment status for tax (CEST) tool asks questions about the work. It helps clients and intermediaries decide if the rules apply.

Things to know

• You can disagree. If you think the decision is wrong, tell the client. They must reply within 45 days. If they do not, they become liable for the tax and National Insurance.
• The rules apply across the UK. This is a UK tax rule, so it is the same in England, Scotland, Wales and Northern Ireland.
• Each contract is judged on its own. You can be inside IR35 for one contract and outside for another.

Related guides

• What is employment status and why does it matter?
• What is an umbrella company?
• How do I become a sole trader?
• How do I register a limited company?

Where this comes from

• Understanding off-payroll working (IR35) (HMRC)
• Off-payroll working for clients (HMRC)
• ESM10006A: size threshold changes from 6 April 2025 (HMRC manual)