An announcement that all UK contractors have been hoping to hear has been made. In an out-of-the-blue policy update, Chancellor Kwasi Kwarteng has committed to repeal the updated IR35 off-payroll legislation.

If you are new to the UK contracting scene, this legislation might be new to you. If are (or have been) a contractor, IR35 will likely have been the bain to your working life for a while.

If you want to learn what this policy update means to you AND if you should automatically hand your notice in at work, this article is for you 🔥🔥🔥

What is the proposed policy IR35 changes?

Within the mini-budget that was delivered on 23 September 2022, the chancellor has committed to axing the changes that were outlined in the 2017 and 2021 IR35 off-payroll policy, there is light at the end of the tunnel 🕳️🚇

The proposed change to IR35 is that the rules are reverting to how they used to be. This does not mean that IR35 is going away. It means that the rules of deciding if a position is deemed inside or outside IR35 (and also dealing with all the admin headaches that come with it) have been changed.

Speaking from personal experience, this is good news for both employers and contractors. Pre-2021, IR35 did not cause too many headaches for the industry at large. Introduced in 1999, IR35 had been around for a long time before my introduction to the world of contracting in 2011.

Since its incorporation, the IR35 legislation has become more and more restrictive over the years. The update that created the most damaging impact to the UK job market was an update that was made in 2021. The 2021 update meant that it was now the employer's responsibility to decide if a role fell inside or outside IR35. With this new responsibility also came a ton of admin work and some legal ramifications if a company made a mistake.

To be clear, the new update to IR35 does not change what gets classed as inside or outside IR35, it is a change in responsibility. One of the main drivers for moving the checking to the employer was that it was impossible for HMRC to police every single contractor in the UK. This meant many contractors fell inside IR35 but classed themselves outside to save on tax.

Many contractors were technically breaking the rules and getting away with it, however, the chance of getting caught and you being investigated by HMRC was minimal.

Changing the checking responsibilities to the employer and then threatening hefty fines meant that a lot of companies became more hesitant when making new hires. Many companies I worked with were so afraid of violating the rules they simply made all their positions inside IR35 roles by default. This meant the day rates for contractors across the UK dropped significantly. When a role was deemed inside IR35 the contractors also had to pay more taxes. Combining fewer roles, a drop in the day rate, and an increase in taxation meant many contractors left the market.

When the gap between take-home pay from contracting compared to permanent is too small, there is little point in taking on the extra risk of contracting for no financial reward or less financial reward.

Introducing this new IR35 policy with the issues caused by the pandemic, meant the contracting scene in the UK died. I personally tried to hire many programmers during this time and it was made much harder as the talent pool was smaller. In the end, we outsourced a lot of the work to offshore contractors who didn't have the same legal issues and we could hire for a cheaper day rate!

Should you hand your notice in today?

Now that the UK contracting scene has hope again, the next logical question for people who have gone permanent or are thinking of becoming a contractor is timing. Is now the right time to hand in your notice?

First, the proposed change will not happen until the next tax year which will start from April 2023, so you have some time to wait and think. While the reform to the IR35 policy is great long-term, this news comes as the picture of the 2023 economy is not looking great. With record-level inflation and giant tech companies like Google and Meta are cutting the workforce, just because the law has changed does not necessarily mean there will be a sudden slew of new contracting jobs in 2023😞

Obiovulksy, a bad econmey adoes not just impact tech companies. Companies like GAP, Goldman sachs and Nordstrom are all planning on reducing their head-counts. You can even use tools like to check in real-time what tech companies are making redundancies.

A recent study by pwc asked 722 US executives what their thoughts on their recruitment needs in 2023 were. The results were not positive, 50% of firms anticipating a reduction in headcount, 52% foreseeing a hiring freeze and 44% rescinding job offers.

With this not-so-positive outlook on the number of new roles coming to the market in 2023, it is worth considering how a similar setback previously affected the job market.

Do what makes you happy

Obviously, I can not answer what career path you should personally follow. When I was younger, the most important career factor for me was salary. Trying to maximise my take-home pay meant that I could travel the world and buy tickets to any festival or gig that took my fancy. In 2021 with the IR35 update, it made more financial sense for me to stop contracting and take a permanent position. With the new policy change, I would expect the salary gap between contracting and permanent to widen enough again to tempt a lot of people back into the contracting game.

Salary should not be the only factor in this decision. I would argue that the most important aspect of a job is your happiness and mental well-being. What aspects of your job make you happy? For me, being able to learn something new provides me with a lot of motivation to give my best at work. An often overlooked aspect of contracting is the need for you to constantly learn new things. Typically, I would change jobs once every 6 months to a year. This constant change meant I also had to keep my technical skills up to date. Each passing year meant new companies to work with, new teams and new needs. This meant I had to constantly learn new things, which I found fun. Being challenged and having opportunities to learn is definitely not a contracting-only trait. If you go contracting you will not be able to work in certain senior roles, like a head of department or CTO role. Thinking about where you want your career to go, will help you decide which avenue will give you the most amount of opportunities.

A final consideration I think worth mentioning is related to a newer trend, the expectation of the hustle culture. When you work as a permanent employee, if you want to make it up the ladder in a lot of places there is definitely an expectation that you need to put in more effort than you get paid for. Maybe you work late or work weekends for the good of the company. Contractors typically do not have the same level of expectations made of them. Nowadays, a lot of people are opting out of this new expectation and a new emerging buzzword is trending, quiet quitting. Quiet quitting means you stay at your current job but you have resolved to only do the required work, e.g. the work you are expected to do. No more, no less. Research by companies like Gallup claims that up to 50% of the American workflow has now quiet quitting. Harvard has done some research into the topics and its findings states the reason for this silent movement are reportedly due to bad bosses. Regardless of the reason, facoring in the true time you are expected to work weekly, may sway you one way or the other.

The point I'm trying to make, is that deciding on a career path is not a binary yes/no. If you think contracting is of interest now is the right time to start prepping. Have you for a private limited company, do you have an accountant, do you have savings to fall back on? Do you have business insurance to cover for HMRC audits. Do you know what type of insurance you need? Is you CV up-to-date?

It does not look like we will be in a strong economy in 2023. For this reason, I do not think that the contracting market will go back to what it was immediately. Also, I would expect a lot of people all trying to get back in the market at the same time in April. In the long term, this IR35 news is definitely great and much needed for contracting. Timing is everything. If you are happy to take the risk, do what makes you happy

If you are interested in contracting for the first time, now is a great time to research. If you are currently unhappy with a permanent job maybe this can be the motivation to keep you going for a while. Happy Coding 🤘