We’re celebrating the unexpected yet brilliant news that the disastrous IR35 reforms will be scrapped. This morning, the new Chancellor of the Exchequer, Kwasi Kwarteng, announced that the most recent changes to IR35 will be repealed. From April 2023, contractors and consultants will once again be responsible for determining their employment status.

This unexpected and tremendously welcome announcement will come as a great relief (and surprise) to the UK’s self-employed community. We’ve lobbied tirelessly over the last few years (and won a Drum PR award for our OffPayroll.org.uk campaign against IR35). We’re exceptionally happy to hear this news and believe that this announcement will reignite the UK’s contingent workforce.

What this means for contractors

• From April 2023, contractors will determine their own employment status again and will be responsible for paying the right tax and NI.
• The changes apply to both the public and private sector.
• We expect to see a resurgence in outside IR35 contracts as businesses compete to hire the best talent.
• This should signal the end of blanket bans among organisations, particularly in competitive sectors.
• Ditch that broken umbrella for good! Contractors should no longer be forced to use umbrella companies.

The end of these recent IR35 reforms is the best news Contractors have had for a long time. The past couple of years have been undeniably tough, with many choosing permanent roles or taking early retirement to avoid working inside IR35 or being forced to use a brolly.

With contractors set to be firmly back in control of their own Employment Status from 2023, we predict many coming back off the bench as well as new faces entering the rejuvenated contracting market. With risk being reduced for end clients, we expect to see an increase in demand, too.

At inniAccounts, we’ve already had several phone calls today from contractors who want us to halt the closure of their company, so they can re-enter the market. If you’ve previously used a limited company and are looking to reopen one, we can help.

Repealing the off-payroll working reforms

Set out in the Chancellor’s Growth Plan 2022 as part of the Government’s commitment to simplifying the tax system and ‘allowing businesses to focus on business’, it states that:

“The 2017 and 2021 reforms to the off-payroll working rules (also known as IR35) will be repealed from 6 April 2023. From this date, workers providing their services via an intermediary will once again be responsible for determining their employment status and paying the appropriate amount of tax and National Insurance contributions.

“This will free up time and money for businesses that engage contractors, that could be put towards other priorities. The reform also minimises the risk that genuinely self-employed workers are impacted by the underlying off-payroll rules.”

Tax changes from Mini Budget for contractors

In addition to the IR35 repeal, there were several other notable announcements in the budgets for contractors.

• National Insurance rise scrapped: From 6th November the government is cutting National Insurance by 1.25 percentage points and cancelling the Health & Social Care Levy. 
  • If you pay yourself a salary, you’ll save on both personal and business NI contributions. 

• Dividend tax increase reversed: The government will reverse the 1.25 percentage point increase in dividend tax rates from April 2023. 
  • The recent increase remains in place until next April. 

• Basic rate of income tax cut: From April 2023, the basic rate of income tax will reduce from 20% to 19% (12 months earlier than planned). 
  • If you pay yourself a salary, you’ll get to keep more of your income.  
  • It’s worth noting that the income tax rate cut will not apply to dividend income. 

• Additional rate of income tax abolished: The government will also abolish the 45% additional rate of income tax completely from April 2023, including from income, savings and dividends.

• Corporation Tax rise cancelled: Though the planned rise was unlikely to affect contractors, the government will cancel the rate increase, maintaining the Corporation Tax rate at 19% from April 2023.  

• Stamp Duty Land Tax cut: For contractors planning a home move in the future, changes to the stamp duty thresholds will be welcome news.   
  • From today (23 September 2022), the SDLT threshold for residential property doubles from £125,000 to £250,000.
  • First-time buyers will now pay SDLT from £425,000
  • First-time buyers’ relief can be claimed £625,000

While these tax changes are positive for contractors, the significance of the scrapping of the IR35 reforms is overwhelming and signals a hopeful future for contracting. 

We’ve been active on LinkedIn today, answering contractors’ questions about what the changes mean for them. We’ve pulled together an IR35 Repeal FAQ Flash Update to address these initial questions. 

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