IR35 Changes 2025: What Contractors Need to Know Ahead of the Autumn Budget

With the Autumn Budget fast approaching, speculation is mounting that the Chancellor could announce further IR35 changes in 2025 and potentially new measures affecting how contractors and end clients manage off-payroll working rules.

Although the major private-sector IR35 reform took place in 2021, the landscape has continued to evolve. Rising tax costs, new small-company thresholds, and tightening rules on umbrella companies have all kept IR35 high on the political agenda.

So, what might change in the Autumn Budget 2025, and how can contractors prepare to protect their position?

1. Why IR35 is still a live issue for contractors

Even years after implementation, IR35 reform remains one of the most complex areas of tax for contractors and businesses alike. HMRC continues to scrutinise compliance, while thousands of contractors remain uncertain about their true status.

Recent HMRC data shows that private-sector IR35 reforms have generated significantly more tax revenue than expected, by some estimates, over £1.8 billion more. Critics argue this suggests many legitimate contractors have been incorrectly forced into “inside IR35” roles.

Meanwhile, research from IPSE’s IR35 Spotlight 2025 reports that two-thirds of contractors feel less confident about securing outside-IR35 engagements compared to previous years. That lack of clarity is why the Autumn Budget 2025 could be pivotal for both fairness and the future of flexible working in the UK.

2. Key IR35 developments already confirmed for 2024–2025

Before looking ahead, it’s worth understanding what’s already changing.

New “small company” thresholds

From April 2025, the thresholds defining a “small company” under IR35 will rise:

Turnover: £15 million (up from £10.2m)
Balance sheet total: £7.5 million (up from £5.1m)
Employees: 50 (unchanged)

For contractors, this means more clients may now qualify as “small” and therefore fall outside the off-payroll working rules, putting the responsibility for determining IR35 status back onto the contractor’s limited company (PSC).

However, because company size is assessed on the previous financial year, many contractors won’t feel the impact until 2026 or 2027. Still, it’s worth checking your clients’ classifications now.

Offsetting rules to prevent “double taxation”

One of the biggest complaints about IR35 enforcement has been double taxation, when both a contractor and client end up paying overlapping tax on the same income.

From April 2024, HMRC introduced a new offset mechanism, allowing tax already paid by the contractor to be credited against what the client owes if HMRC later overturns a determination. This brings much-needed fairness to the system and reduces financial risk for end clients.

NIC increases and benefit changes

From April 2025, the employer’s National Insurance Contributions (NICs) rate will increase from 13.8% to 15%, and more benefits in kind will need to be payrolled from April 2026.

Contractors operating inside IR35, or via umbrella companies, may therefore see further reductions in take-home pay unless they renegotiate rates or structure engagements differently.

3. What might change in the Autumn Budget 2025?

No official announcements have been made yet, but here are the areas where reform is most likely, based on government briefings and industry speculation:

Possible IR35 Change	What It Could Mean for Contractors
Umbrella company regulation	Stricter oversight or licensing for umbrella companies to curb tax avoidance and protect workers.
Refinements to offset rules	Expanded relief or retrospective application to correct previous double-taxation cases.
Transitional support for size threshold changes	Extended grace periods for medium companies becoming “small” under new definitions.
Simplified status assessment framework	Possible improvements or replacements for HMRC’s criticised CEST tool.
Safe-harbour guidance for genuine contractors	Clearer rules to help contractors evidence “outside IR35” status without fear of challenge.

While none of these are guaranteed, industry observers expect the Chancellor to address fairness and compliance balance, particularly given the government’s growth ambitions and reliance on the flexible labour market.

4. How contractors can prepare now

Regardless of what’s announced in November, taking proactive steps now will help contractors remain compliant and confident.

a) Review your IR35 status

Use this pre-Budget window to undertake a full IR35 status review.

Compare your contracts and working practices against key IR35 tests: control, substitution, and mutuality of obligation.
Use HMRC’s CEST tool as one reference point, but supplement it with an independent expert review.
Keep evidence of your independence: multiple clients, project-based work, your own equipment, and marketing materials all strengthen your case.

b) Talk to your clients and agencies

Open dialogue can prevent misunderstandings later.

Ask clients whether they will still be classified as “medium/large” after April 2025.
Discuss how IR35 status is determined and whether they plan to use CEST or third-party tools.
Clarify who will carry the liability if HMRC challenges the status.

c) Align your contracts with reality

Many IR35 disputes arise because written contracts don’t reflect day-to-day working practices.

Ensure your contract allows for substitution (and make use of it if practical).
Avoid terms that suggest supervision, direction, or control by the client.
Clearly define deliverables and project scope to reinforce your independence.

d) Plan for different scenarios

Prepare a “what if” plan:

If you’re inside IR35: Recalculate your take-home pay, factoring in employer NIC and reduced expenses.
If you’re outside IR35: Ensure your evidence trail is watertight in case of HMRC review.
Consider how rate changes, expenses, and future tax reforms could affect your long-term position.

e) Keep records and evidence

HMRC enquiries can look back several years. Keep all documentation related to your contracts, invoices, and correspondence about status determinations. This is your first line of defence.

5. Common pitfalls to avoid

Relying solely on CEST: The tool has faced ongoing criticism for ignoring key case-law factors. Treat it as guidance, not gospel.
Assuming small-company exemption applies immediately: The timing depends on financial-year data; don’t jump the gun.
Blanket inside-IR35 assessments: Push back against one-size-fits-all approaches; each engagement should be assessed on its own merits.
Neglecting ongoing reviews: Even if you were outside IR35 last year, changes in working practice can shift your status.

6. Stay ahead of IR35 changes with Broadbench

Whether the Autumn Budget 2025 brings major IR35 reform or subtle adjustments, one thing is clear, contractors who prepare early will be best placed to adapt.

By reviewing your contracts, clarifying your client relationships, and understanding the latest off-payroll working rules, you can continue operating confidently and compliantly, whatever the Chancellor announces.

At Broadbench, we help contractors and independent professionals like you maximise tax-efficient ways to protect you, your loved ones and your business, irrespective of your IR35 status.

Stay tuned for our Budget analysis after the 2025 announcement.

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