My client is now a small company — what does that mean for my IR35 status?

It means you — through your Personal Service Company (PSC) — are now responsible for determining your own IR35 status. Your client no longer needs to issue a Status Determination Statement (SDS). You should review your current contract and working practices against the three IR35 status tests: supervision/direction/control, right of substitution, and mutuality of obligation.

Do I need a new IR35 contract now the April 2026 changes are in effect?

If your client has reclassified as small and IR35 responsibility has shifted to your PSC, you should ensure your contract reflects genuine outside IR35 working arrangements. If you've been working on an inside IR35 basis with your client issuing an SDS, and they're now small, you can potentially move to outside IR35 — but your working practices must also reflect this. A professional contract review is strongly recommended before making any changes.

What changed for umbrella company contractors from April 2026?

From 6 April 2026, agencies that supply workers through umbrella companies must operate PAYE directly on payments to umbrella workers. This restructures the payment chain. For workers on compliant umbrella arrangements, the practical impact is mainly administrative — but your take-home pay calculations should be re-modelled for 2026/27. If your agency hasn't explained how this affects your payslip, ask them now.

Have the IR35 rules themselves changed in April 2026?

No. The core IR35 legislation is unchanged. The status tests — the SDC test (supervision, direction, control), substitution, and mutuality of obligation — remain exactly the same. What changed is which companies qualify as small (exempt from the off-payroll rules), and the tax and NI rates that apply when a contractor is inside IR35.

Should I get IR35 insurance now I'm self-assessing my status?

If you're now responsible for your own IR35 determination — because your client reclassified as small — IR35 insurance is worth serious consideration. It covers professional defence fees and any tax liability if HMRC opens a compliance check. Qdos IR35 insurance starts from around £99/year; Kingsbridge IR35 Protect from around £199/year. Get cover before you need it.

IR35 April 2026: The Changes Are Now In Effect

Q: Are the IR35 April 2026 changes now in effect?

Yes. The changes took effect from 6 April 2026. The small company threshold increased (turnover £15m, balance sheet £7.5m), approximately 14,000 companies reclassified as small, and umbrella company PAYE rules changed so agencies must deduct tax and NI directly.

What Just Changed

Three things took effect on 6 April 2026. One of them directly changes who is responsible for your IR35 determination if your client is now a small company. Here's the rundown.

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Change 1: Small Company Threshold — Now £15m

✅ Live

From 6 April 2026, a company is now classified as small if it meets two of three criteria: turnover under £15 million (was £10.2m), balance sheet under £7.5 million (was £5.1m), or fewer than 50 employees (unchanged).

This means roughly 14,000 companies have reclassified as small as of this week. Small companies are exempt from the off-payroll working rules — they don't need to issue a Status Determination Statement (SDS) and IR35 status determination shifts back to your Personal Service Company (PSC).

If your current client has just become small: you are now responsible for your own IR35 determination. This is a significant shift if you've been relying on their SDS for the past few years.

Full threshold changes guide →

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Is your client now a small company?

Check their last filed accounts at Companies House. If their turnover is now below £15m (and they meet one other criteria), they've reclassified. You need to self-assess your IR35 status immediately.

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Change 2: Umbrella PAYE — Agencies Now Deduct Direct

✅ Live

From 6 April 2026, agencies that supply workers through umbrella companies must operate PAYE directly on payments to those workers. This restructures the payment chain and closes a route used by non-compliant umbrella companies operating disguised remuneration schemes.

For standard umbrella workers on compliant arrangements, the practical impact is mostly administrative — but your payslip structure may look different, and your take-home pay calculations should be re-modelled for 2026/27. If your agency hasn't explained what's changed, ask them this week.

Full umbrella PAYE changes guide →

Ongoing: Tax Band Freeze — Fiscal Drag Continues

⚠️ Ongoing

The personal allowance (£12,570) and higher rate threshold (£50,270) remain frozen for 2026/27, and are set to stay frozen until at least 2028. As contractors negotiate rate increases, a greater share of that extra income falls into higher tax bands — this is fiscal drag, and it bites harder every year the freeze continues.

If you moved from £400/day to £450/day in the past two years, you're likely paying a noticeably higher effective rate, even though the band thresholds look unchanged. Now is a good time to model your 2026/27 take-home and check whether your day rate still makes sense.

Model your 2026/27 take-home →

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The core IR35 rules did NOT change

The fundamental IR35 legislation is unchanged. The three status tests — supervision/direction/control, right of substitution, and mutuality of obligation — remain exactly the same. What those tests mean for your situation hasn't changed; what changed is who applies them for you.

🎯 Your April 2026 Action List — Do This Week

Check if your client has reclassified as small

Look up their filed accounts at Companies House. If turnover < £15m and balance sheet < £7.5m (or fewer than 50 employees), they're now small. This is the single most important thing to check.

If they reclassified — review your contract and working practices

You're now self-assessing your IR35 status. Use the outside IR35 evidence checklist and consider a professional contract review. This is not optional — if HMRC investigates and you haven't done this, you're exposed.

If you're outside IR35 and self-assessing — get insurance

IR35 insurance covers defence fees and tax if HMRC investigates. Qdos starts from ~£99/year. Get cover before you need it — especially if your client has just reclassified and this is your first time self-assessing in years.

Umbrella workers: ask your agency what changed on your payslip

The new PAYE rules may have changed how your pay is structured. If your agency hasn't communicated this, follow up. Your 2026/27 take-home should be confirmed before your next payment.

Re-model your take-home pay for 2026/27

The frozen tax bands mean your effective rate has crept up if your rate has risen. Run the free IR35 calculator with your current day rate and see what inside vs outside IR35 means for you this year.

What Didn't Change

It's worth being clear about what's not different:

IR35 status tests: supervision/direction/control, substitution, and mutuality of obligation — all unchanged.
Employer National Insurance rate: 15% — this rose in April 2025 and has not changed again for 2026/27.
Off-payroll rules for medium and large companies: medium and large companies still issue SDS and are responsible for IR35 status. That hasn't changed.
HMRC enforcement approach: HMRC has not announced any relaxation of IR35 investigations. The risk profile for contractors hasn't changed.

See the full picture: complete guide to all April 2026 IR35 changes.

Frequently Asked Questions

Are the IR35 April 2026 changes now in effect? +

Yes. All changes took effect from 6 April 2026. The small company threshold increased, umbrella PAYE rules changed, and income tax bands remain frozen. If your client reclassified as small, you're already in the new regime.

My client is now a small company — what do I do? +

You're now responsible for your own IR35 determination through your PSC. First, check your current contract reflects genuine outside IR35 working arrangements. Use the outside IR35 evidence checklist to document your working practices. If you're uncertain, get a professional contract review. And consider IR35 insurance if you don't already have it.

Do I need a new contract now my client is small? +

Not necessarily a new contract, but your existing contract should reflect outside IR35 characteristics — substitution clauses, no mutuality of obligation, limited control. If your contract was written when you were inside IR35 (with your client determining status), it may need updating. A contract review can confirm this.

I've been inside IR35 for years — can I now move outside? +

If your client reclassified as small and IR35 responsibility has shifted to your PSC, then yes — you can potentially operate outside IR35 if your contract and working practices genuinely reflect self-employment. But you can't simply declare yourself outside without reviewing the substance. Your working arrangements must support it. Don't just change the label without changing the reality.

Should I get IR35 insurance now? +

If you're now self-assessing your IR35 status — especially for the first time in years — IR35 insurance is strongly worth considering. It covers HMRC investigation defence costs and any resulting tax liability. Qdos IR35 insurance starts from around £99/year; Kingsbridge from around £199/year. Get it before you need it.

What changed for umbrella company workers? +

Agencies supplying workers through umbrella companies must now operate PAYE directly on payments. For workers on compliant schemes, the change is mainly administrative. Ask your agency how your payslip has changed and re-model your 2026/27 take-home pay with updated figures. See the full umbrella PAYE changes guide for detail.