The UK raised the IR35 small-company thresholds, but when it helps depends on your year-end

On 6 April 2026 the size thresholds that decide whether a UK client is a small company for the off-payroll working rules (IR35) went up. It is a quiet change with a real effect: more clients now count as small, and for a small client the off-payroll reform does not apply, so the decision about a contractor status swings back to the contractor own company. If you engage contractors through personal service companies, or you are that contractor, it changes who carries the risk.

What the thresholds are now

A client is small, and therefore outside the 2021 off-payroll reform, if it stays under at least two of three limits. From 6 April 2026 two of those limits rose:

• Turnover: up from 10.2 million pounds to 15 million pounds.
• Balance-sheet total: up from 5.1 million pounds to 7.5 million pounds.
• Employees: unchanged at 50, still a monthly average.

Because the test is two out of three, a company stays small as long as it breaches no more than one of them. Raising two limits by roughly half pulls a band of mid-sized firms back under the line.

Who decides status, before and after

Since April 2021 a medium or large private-sector client has had to decide each contractor status, issue a status determination statement, and have the fee-payer deduct income tax and National Insurance where the engagement is inside IR35. When a client is small, none of that applies to it. Responsibility reverts to the contractor personal service company under the original IR35 rules: the company decides its own status and accounts for any tax due. The liability does not vanish, it moves.

The catch nobody puts in the headline: timing

The threshold values changed on 6 April 2026, but that is not the day most engagements flip. The size test looks at a company financial years, not at today, and a company is only reclassified once it has met the size condition across the relevant periods, which for many businesses pushes the practical effect to April 2027 at the earliest. So the honest read is that the thresholds are higher now, but whether and when your specific client becomes small depends on its year-end and its last two sets of accounts. Do not assume the reform stopped applying to you on 6 April 2026, check the client actual size position for the tax year in question.

Being outside IR35 is not the same as being safely a contractor

This is the part worth keeping straight. The off-payroll rules decide who assesses status and who operates PAYE. They do not change the underlying question of whether the working relationship is genuinely self-employment or really disguised employment. That question turns on how the work actually happens, control, integration, exclusivity and the rest, and it is what creates the tax bill and the employment-law exposure if you get it wrong. A client dropping to small does not make a contractor who works set hours on your equipment exclusively for you any less of an employee in substance; it just moves who is on the hook for calling it. If you are relying on the label, the substance is still the thing an inspector scores.

Our free misclassification checker walks the six factors that decide whether an engagement is really employment, gives each a red, amber or green read and an overall 0 to 100 risk score, and flags where the relationship would not survive a challenge, whoever is formally responsible for the status call.