What is Off-Payroll Working Rules? UK Definition 2026/27
Quick Answer
IR35 rules that make clients responsible for determining contractor tax status.
Definition of Off-Payroll Working Rules
The off-payroll working rules (IR35 reform) shifted responsibility for determining contractor employment status to clients from April 2021 for medium and large businesses. If a contractor would be an employee if engaged directly, the client must deduct PAYE and NI. Small companies remain exempt - contractors make their own determination.
Off-Payroll Working Rules — Key Facts for 2026/27
| Effective | April 2021 (private sector) |
| Status Determination | Client responsibility |
| Small company exempt | Yes |
| Tool available | CEST (Check Employment Status) |
How Off-Payroll Working Rules Works — Example
- 1Contractor with PSC, £500/day rate
- 2Client determines: Inside IR35
- 3Fee payer deducts PAYE/NI before paying PSC
- 4Contractor net: Reduced significantly
- 5If outside IR35: No deductions, PSC pays
How Off-Payroll Working Rules Affects Your Tax
The off-payroll rules significantly affected contractors. Inside IR35 determinations reduce take-home pay substantially. Many clients blanket-determined inside to avoid risk, affecting genuine contractors. Status reviews and contract structures are crucial.
Official HMRC Guidance on Off-Payroll Working Rules
For official guidance, refer to HMRC's documentation. Tax rules can change, so always verify current rates and thresholds on gov.uk.
HMRC: Off-payroll working rulesFrequently Asked Questions about Off-Payroll Working Rules
Related Tax Terms
Accuracy Note
This information is for guidance only and is based on 2026/27 tax year rates. Tax rules are complex and your circumstances may differ. For personal advice, consult a qualified accountant or tax adviser.