If you’re a contractor working through your own limited company—or an organisation hiring contractors—you need to be aware of some important changes to the off-payroll working rules coming in from 6 April 2025.
These rules, often referred to as IR35, determine who’s responsible for checking employment status and paying the right amount of tax and National Insurance. And with the thresholds for ‘small company’ status increasing, that responsibility could soon be shifting.
Let’s break down what’s changing, what it means for you, and how to stay compliant.
A Quick Recap: What Are the Off-Payroll Working Rules?
The off-payroll working rules apply when a contractor provides services to a medium or large private sector business, or to a public sector body, through an intermediary—typically a personal service company.
In these cases, it’s the end client’s responsibility to assess the contractor’s employment status. If the contractor would be classed as an employee if working directly, the client (or another fee payer) must deduct tax and National Insurance at source before paying the contractor’s company.
The contractor still receives credit for this tax, so it’s not paid twice—but it does affect cash flow and administration.
What About Small Companies?
Here’s where things get interesting.
If the end client is a small private sector organisation, the off-payroll working rules don’t apply. Instead, it’s the contractor’s own company that must decide whether IR35 applies—and if so, calculate and pay tax on a “deemed payment” at the end of the tax year.
This is a big difference in compliance burden, especially for small businesses and contractors alike.
To help determine status, HMRC provides the Check Employment Status for Tax (CEST) tool, which can guide both businesses and workers through the process.
What’s Changing from April 2025?
The thresholds that define a business as ‘small’ under the Companies Act—and therefore exempt from the off-payroll working rules—are going up from 6 April 2025.
A company will be considered small if it meets at least two of the following criteria:
| Criteria | New Threshold (from April 2025) | Old Threshold |
| Turnover | Not more than £15 million | £10.2 million |
| Balance sheet total | Not more than £7.5 million | £5.1 million |
| Monthly average employees | 50 or fewer | (No change) |
What Does This Mean in Practice?
If you’re a contractor, this could mean that the end client you work with no longer has to carry out the IR35 assessment—you might now be responsible for it again.
On the flip side, if you’re a business that previously didn’t qualify as ‘small’ but now does under the new thresholds, you’ll no longer have to deal with the off-payroll working rules.
While that sounds like good news, it’s crucial to communicate clearly with any contractors you hire, as they’ll now need to assess their own IR35 status and ensure they’re staying compliant.
Not Sure How This Affects You?
Changes to IR35 and off-payroll working can be confusing—and the rules can vary depending on your setup and your clients.
If you’re a contractor or a small business navigating these changes, we’re here to help. At Jon Davies Accountants, we’ll walk you through the rules, assess your situation, and make sure everything is above board.
Get in touch today to speak with one of our experts and stay ahead of the 2025 changes.
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