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Off-payroll Working

Question for Treasury

UIN HL14298, tabled on 16 March 2021

To ask Her Majesty's Government what assessment they have made of the impact of changes to the off-payroll working rules due to come into effect from 6 April on freelancers; and what steps they are taking to ensure that it is financially viable for freelancers to continue operating as self-employed individuals.

Answered on

23 March 2021

The changes to the off-payroll working rules come into effect on 6 April 2021 and were legislated for in Finance Act 2020. The off-payroll working rules have been in place for over 20 years and are designed to ensure that individuals working like employees but through their own limited company pay broadly the same Income Tax and National Insurance contributions (NICs) as those who are directly employed.

The Tax Information and Impact Note (TIIN)[1] published at Spring Budget 2021 sets out HMRC’s assessment that the reform of the off-payroll working rules is expected to affect about 180,000 individuals working through their own limited companies.

The changes to the off-payroll working rules do not introduce a new tax liability. Those who are complying with the existing rules should feel little impact on their income.

The measure is targeted at individuals who are not compliant with the existing rules, and it shifts responsibility for determining an individual’s status from the individual’s limited company to the client engaging them. These individuals will be required to pay tax at the correct levels and will therefore face additional tax liabilities. However, there will be continuing savings for the individual’s limited company as they will no longer have the requirement to determine status or associated accounting burdens.

[1] https://www.gov.uk/government/publications/off-payroll-working-rules-from-april-2021/off-payroll-working-rules-from-april-2021

Answered by

Treasury