What is IR35?
IR35 is a set of tax rules that decide whether a contractor working through their own limited company is really acting like an employee — and so should be taxed like one.
How it works
If a contract is 'inside IR35', the worker is taxed broadly as an employee (more income tax and National Insurance). If 'outside', they are taxed as a business. Since 2021, in most cases the client — not the contractor — decides the status.
Why it matters now
IR35 is widely disliked by freelancers and contractors as complex and unfair. Reform UK proposes abolishing it, which it frames as support for the self-employed; critics warn it could reopen 'disguised employment' tax avoidance.
Plain-English definition for general information only — not financial, legal or tax advice. Rates are 2025/26 unless stated.