Off Payroll Working Rules: Changes to Company Size Thresholds

HMRC has now confirmed that the changes to company size thresholds, effective from 6 April 2025, will also apply to the off payroll working rules. This is important news for companies who employ contractors through intermediaries.

What's changing?

From 6 April 2025, the financial thresholds determining whether a company is "small" will increase:

• Turnover threshold increased from £10.2m to £15m
• Balance sheet total increased from £5.1m to £7.5m
• Employee threshold left unchanged at 50

A company will be "small" if it meets at least two of these three conditions.

Why this is important

Under the current off payroll working rules (traditionally referred to as IR35), medium and large businesses are responsible for determining the employment status of workers providing services through an intermediary. If the worker is defined as an employee for tax purposes, the business must run PAYE and national insurance contributions.

Small businesses will be exempt from the provisions, and deciding employment status will be with the worker's intermediary or personal service company.

When will these changes take effect?

While the threshold changes apply from 6 April 2025, there is an important timing element to note. A company’s size for off payroll working rules is determined by its previous year end. This means that these changes will not have a practical impact until 6 April 2026 at the earliest. Until then, businesses, medium or large in size, must continue to comply with the existing off payroll working rules.

What happens next?

There are no transitional provisions. If your business is redefined as "small" under the new sizes, the responsibility to decide employment status will revert back to the worker's intermediary. HMRC has also assured that they will update their employment status guide manual to incorporate these changes.

If you have any questions about how these changes might affect your business, please don't hesitate to get in touch with us. We will keep you posted as HMRC publishes more details about these major changes.