Small Business Accountants

Potential PM Liz Truss vows to review IR35 contractor laws

During the 2022 Conservative leadership contest, Liz Truss promised to review IR35 off-payroll working rules that shifted tax status decisions to hiring businesses. Contractors and industry bodies welcomed the pledge, but Truss resigned as Prime Minister before any changes were made. The IR35 reforms introduced in 2017 for the public sector and extended to the private sector in 2021 remain fully in force for the 2025/26 tax year.

By Jordan Macey MAAT Reviewed by Noor Fiaz Updated 16 Apr 2026 3

Key takeaways

Liz Truss pledged during the 2022 leadership race to review IR35, calling the rules unfair to self-employed workers who pay employee-level tax without receiving employee benefits.
Industry bodies such as IPSE and the Association of Independent Professionals called for IR35 to be scrapped entirely, not merely reviewed again.
Studies found over 90% of contractors opposed the 2021 private sector IR35 reforms, with 60% saying working inside IR35 was not financially viable.
Truss resigned as Prime Minister after 45 days in office, and no changes to IR35 were enacted during or after her brief tenure.
The off-payroll working rules remain in force for 2025/26, meaning medium and large private sector clients still determine a contractor's IR35 status before engagement.

Introduction

The PM hopeful Liz Truss has promised to review the IR35 tax legislation once she becomes prime minster.

In an interview with the sun Truss had stated that theIR35 reform, established by the ex-chancellor and fellow prime mister candidate Rushi Sunak is “all about trying to treat the self-employed the same as big business”

The biggest criticism of the current rules for IR35 is that while contractors are taxed the same way as employees, they do not receive the same benefits like holiday pay and paid sick leave. In an interview with the sun Truss stated this is something that should be changed.

“But the fact is, if you’re self-employed, you don’t get the same benefits as being in a big company. You don’t get paid holidays; you didn’t get those benefits. So, the tax system should reflect that more.”

In her interview with the Sun truss added:

“I’ve always been passionate about helping our country become more successful. I want people to have opportunities. Of course, I believe in hard work.

“I want our government to be on the side of people that work hard who set up their own businesses.”

The foreign secretary plans to make sure those who are self-employed are treated fairly. The recent government reforms to theIR35 tax legislation have faced disapproval from policy makers as they believe its too difficult to navigate.

Concerns from Contractors

Many Contractors have expressed their frustration with the promise of another review. In the 2019 Conservative manifesto, there was promise of a IR35 review however the party went along with their private sector changes in 2021.

CEO of Tax Compliance firm IR35 shield believes that IR35 is currently hindering flexibility at a time when the economy needs it the most. He stated “We don’t need another review, we need action. The so-called reforms are a flawed botch and have simply served to strangle contractors and those businesses which hire them.”

Andy Chamberlain, Director of Policy at The Association Of Independent professionals and self employed has come out to say that Liz Truss should just scrap IR35. “This review must lead to radical and tangible change. Nothing should be off the table, including scrapping this dreadful legislation altogether.”

A recent study by Simply Business found that more than 90% of contractors believed that the IR35 reform in 2021 should have been further delayed, with half agreeing that the it should be scrapped altogether.

IR35 Impact

To understand the impact that reforms have, a study was conducted by IPSE, who asked 400+ freelancers the experience they had with IR35 contracts. The study found that over 40% of freelancers had stated that “they had worked on contracts deemed outside IR35over the last 12 months, despite the imposition of IR35 reforms in April 2021”

20% reported company closure within the last 12 month sand 14% stating that they moved to permanent employment within the same time. Among those who had not moved to permanent employment, 18% are currently notworking. 72% claimed the reason for this was due to the introduction of IR35 reforms.

Similarly in a study conducted by insurerIR35 shield, 425 freelancers reported to have moved to permanent work due to IR35.

60% of these respondents stated that working inside of IR35 was not financially viable and 73% said they were worse off.

74% reported they would move back to contracting if they could secure an outside IR35 contract. 41% revealed that they were out of work for six months following the roll out of the tax legislation however this was during the pandemic therefore this may have not been the result of IR35 implementation.

Frequently asked questions

What did Liz Truss promise to do about IR35?

During the 2022 Conservative leadership contest, Liz Truss pledged to review the IR35 off-payroll working rules. She argued that contractors were being taxed at the same rates as employees without receiving equivalent benefits such as holiday pay and statutory sick pay. Truss described the legislation as unfair to self-employed workers and said the tax system should better reflect the risks freelancers take by working without employment protections.

Did IR35 change after Liz Truss became Prime Minister?

No. Liz Truss resigned as Prime Minister after just 45 days in office in October 2022, and no amendments to IR35 were introduced during her tenure. The subsequent government under Rishi Sunak confirmed the off-payroll working rules would remain in place. As of the 2025/26 tax year, the IR35 framework continues to operate exactly as it did following the April 2021 private sector rollout.

What are the IR35 off-payroll working rules?

IR35 is tax legislation designed to identify contractors who work through an intermediary, typically a personal service company, but whose engagement resembles employment. The off-payroll rules require the hiring organisation to assess whether the contractor falls inside or outside IR35. If inside, income tax and National Insurance are deducted at source, similar to an employee. The rules apply to all public sector clients and medium or large private sector businesses.

Why do contractors oppose the IR35 reforms?

Contractors argue the reforms are unfair because workers caught inside IR35 pay tax equivalent to employees yet receive none of the associated benefits, including holiday pay, pension contributions and redundancy protection. Industry surveys found that 60% of freelancers said working inside IR35 was not financially viable, and 20% reported closing their limited companies as a direct result. Many also criticise the status determination process as inconsistent and difficult for hiring businesses to apply correctly.

When were the IR35 off-payroll rules introduced?

The original IR35 legislation was introduced in 2000 to target disguised employment. The off-payroll working reforms, which shifted responsibility for determining IR35 status from the contractor to the hiring organisation, took effect in the public sector in April 2017. These rules were extended to medium and large private sector businesses in April 2021, after a one-year delay caused by the Covid-19 pandemic.

How does IR35 status affect a contractor's take-home pay?

A contractor working inside IR35 has income tax and employee National Insurance deducted from their fees before payment, reducing take-home pay significantly compared to an outside IR35 engagement. The hiring business or agency also pays employer National Insurance on top. Contractors inside IR35 cannot claim the same tax-efficient dividend and salary strategies available to those operating outside the rules through a personal service company.

Who determines IR35 status for contractors in the private sector?

For medium and large private sector organisations, the hiring client is responsible for assessing whether a contractor falls inside or outside IR35. They must issue a Status Determination Statement (SDS) setting out their decision and the reasons behind it. The contractor can dispute the determination, and the client must respond within 45 days. Small businesses are exempt from these rules, meaning the contractor retains responsibility for their own status assessment.

What should contractors do to check their IR35 status today?

Contractors should use HMRC's free Check Employment Status for Tax (CEST) tool as a starting point, though it does not cover every scenario. Key factors include the right of substitution, the degree of control the client exercises, and whether the contractor is genuinely in business on their own account. Seeking advice from an accountant experienced in IR35 is recommended, particularly for borderline engagements where the financial impact of an incorrect determination can be substantial.