IR35 for IT freelancers is one of those topics that gets talked about constantly but rarely explained clearly. If you do contract or freelance IT work and you are not sure whether it applies to you, this is worth five minutes of your time.

What is IR35 and why does it come up so often for IT freelancers?

IR35 is a piece of tax legislation that HMRC uses to decide whether a contractor or freelancer should really be taxed as an employee. The name comes from a 1999 Inland Revenue press release, which tells you everything about how exciting the original announcement was. In simple terms, if HMRC thinks you are working as an employee in all but name, they want you to pay income tax and National Insurance contributions as if you were on the payroll.

IT freelancers come up against this more than most because the nature of the work often involves long contracts, working inside a single client’s systems, and following their processes day to day. That can look a lot like employment to HMRC, even if you have your own limited company and invoice through it. The key question is always: if you strip away the paperwork, does the working arrangement look like a job?

What changed in April 2026 and why it matters now

From 6 April 2026, new rules came into force that place joint and several liability on end clients and agencies for correct tax payments under IR35. That means if a worker is paid through an umbrella company and the tax is not handled correctly, HMRC can chase the agency or the end client directly, not just the umbrella. For IT freelancers working through agencies or on client sites, this has changed how carefully clients are checking IR35 status before a contract starts.

The thresholds for who counts as a medium or large business under IR35 also shifted in April 2025, with turnover rising to £15 million and balance sheet to £7.5 million. That brings more businesses into scope as the determining party for your IR35 status. If you are a smaller IT freelancer working for companies that sit around those numbers, it is worth knowing whether they have done a formal status determination for you.

How IR35 actually affects your money day to day

If you are deemed outside IR35, you pay yourself a salary and dividends through your limited company, which is generally more tax-efficient. You handle your own corporation tax, and at the end of the year you file a self assessment return for the dividends you have taken. I handle exactly this kind of thing for IT freelancers on a fixed monthly basis, so the admin side does not pile up on you.

If you are inside IR35, your income from that contract gets taxed as employment income, which means more goes to HMRC before it reaches you. Your limited company still receives the payment from the client, but you have to run a deemed salary calculation and pay PAYE and National Insurance on it. It is not the end of the world, but it does mean your bookkeeping needs to reflect that correctly, and the records need to be accurate.

What should you actually do if you are an IT freelancer?

Start by getting a written status determination from any client who counts as a medium or large business. They are legally required to provide one if asked, and it tells you whether that contract sits inside or outside IR35. Keep a copy of it somewhere you can find it.

Make sure your bookkeeping reflects your actual IR35 status accurately across every contract you hold. Making Tax Digital is now live for sole traders in 2026, which means digital records are no longer optional for many people. If you are unsure whether your books are set up correctly, a quick conversation with me costs nothing, and I can tell you honestly whether there is a problem.