For consultants working in the UK, understanding IR35 legislation has never been more important. Since its introduction in 2000, IR35—also known as the off-payroll working rules—has been reshaping how consultants, contractors, and businesses engage with one another.

In 2025, the landscape continues to evolve, and consultants must stay informed to ensure they remain compliant while maximising their earnings. This guide explains the key IR35 rules, their impact on consultants, and practical steps to take in order to work confidently within the regulations.

What Is IR35?

Consultant IR35 is HMRC legislation designed to prevent “disguised employment.” This is where individuals work like employees but operate through a limited company (often called a personal service company or PSC) to pay less tax and National Insurance.

If a consultant is found to be inside IR35, they are treated as an employee for tax purposes. This means they must pay:

• Income tax via PAYE
• Employee National Insurance Contributions (NICs)

If a consultant is outside IR35, they are genuinely self-employed and can take advantage of tax efficiencies, such as dividends and business expenses.

How IR35 Applies to Consultants

Consultants often work on flexible, project-based contracts, which makes IR35 particularly relevant. HMRC looks beyond what’s written in the contract and examines the actual working practices.

Some key factors include:

1. Control – Does the client control how, when, and where you work?
2. Substitution – Can you send someone else to do the work instead of you?
3. Mutuality of Obligation (MOO) – Is the client obliged to offer ongoing work, and are you obliged to accept it?
4. Financial Risk – Do you take on financial risk, such as fixing mistakes in your own time?
5. Integration – Are you treated like part of the client’s staff (e.g., using staff perks, attending team meetings)?

The more your arrangement looks like employment, the more likely you are to fall inside IR35.

Recent Changes to IR35 Rules

The key changes in recent years have centred on who determines IR35 status.

• Before April 2021: Contractors working through their own limited companies were responsible for determining their IR35 status in the private sector.
• Since April 2021: Medium and large businesses became responsible for assessing IR35 status, not the consultant. Small businesses are exempt, and consultants contracting with them still make their own assessments.

For consultants in London and across the UK, this shift means that many clients prefer engaging contractors through umbrella companies, which simplifies compliance.

Why IR35 Matters for Consultants in 2025

With HMRC continuing to clamp down on non-compliance, IR35 is a critical issue for consultants.

• Tax impact: Being inside IR35 can significantly reduce take-home pay.
• Client decisions: Many organisations now prefer contractors who use umbrella companies or can prove compliance.
• Increased HMRC scrutiny: Data-sharing agreements and digital tools give HMRC more visibility than ever into working practices.

For consultants, understanding and planning around IR35 is vital for financial stability and career flexibility.

How Consultants Can Stay Compliant

Here are some practical steps consultants should take in 2025:

1. Review Your Contracts Regularly

Make sure your consultancy agreements clearly reflect your independence. Clauses on substitution, control, and financial risk are especially important.

2. Work With Compliant Clients

If you’re contracting with medium or large businesses, ensure they carry out status determination statements (SDS) fairly and transparently.

3. Consider Umbrella Employment

For contracts likely to fall inside IR35, working through an umbrella company may be the simplest solution. Your tax is handled via PAYE, ensuring compliance and avoiding risk.

4. Keep Evidence of Working Practices

Maintain records of how you actually work, including invoices, correspondence, and project briefs, in case of an HMRC review.

5. Seek Professional Advice

Specialists can help you assess your IR35 status and plan accordingly. For consultants juggling multiple contracts, this guidance can be invaluable.

Common IR35 Myths Consultants Should Avoid

IR35 has been around for over 20 years, yet many consultants still misunderstand how it works. Let’s bust a few myths:

• Myth 1: IR35 only applies to IT consultants
  Wrong—IR35 applies to consultants in all sectors, from finance and construction to healthcare and marketing.
• Myth 2: Having a contract labelled ‘outside IR35’ is enough
  HMRC looks at actual working practices, not just contracts.
• Myth 3: Small contracts don’t matter
  There’s no earnings threshold—IR35 applies regardless of the contract’s value.
• Myth 4: If you use an agency, IR35 doesn’t affect you
  Whether you’re hired directly or through an agency, IR35 can still apply.

The Role of Payroll Services in IR35 Compliance

For consultants, one of the biggest challenges is balancing compliance with efficiency. This is where professional payroll services and umbrella arrangements come in.

By using payroll services, consultants can:

• Ensure accurate PAYE and NIC deductions.
• Reduce the administrative burden of tax filing.
• Stay compliant with HMRC, avoiding the risk of penalties.
• Focus on delivering high-quality consultancy rather than worrying about paperwork.

The Infinity Group: Supporting Consultants Through IR35

For consultants seeking a reliable partner in navigating IR35, The Infinity Group provides dedicated payroll and compliance support.

The Infinity Group helps consultants by:

• Managing PAYE and umbrella payroll solutions for those working inside IR35.
• Assisting with CIS payroll for consultants in the construction sector.
• Offering clear, transparent guidance to ensure compliance with HMRC rules.
• Reducing administrative hassle so consultants can focus on their projects.

By partnering with The Infinity Group, consultants gain peace of mind that their payroll is compliant, their records are accurate, and their income is processed reliably.

Looking Ahead: IR35 and Consultants in 2025

As we move further into 2025, consultants should expect HMRC to continue focusing on IR35 compliance. With the economy increasingly reliant on flexible talent, the government wants to ensure tax fairness between employees and contractors.

For consultants, this means:

• Continuing to review contracts carefully.
• Maintaining awareness of HMRC updates.
• Using professional payroll services to stay compliant.

Those who adapt to the rules and embrace compliant working models will remain competitive in the London and wider UK contracting market.

Final Thoughts

The IR35 rules have fundamentally changed how consultants operate in the UK. In 2025, they continue to shape the contracting market, influencing everything from client preferences to take-home pay.

For consultants, the key is to understand how the rules apply, take proactive steps to ensure compliance, and seek support when needed. Whether through careful contract management or professional payroll solutions, staying ahead of IR35 is essential.

And for those seeking expert support, The Infinity Group provides the knowledge, services, and reassurance consultants need to navigate IR35 confidently while focusing on what they do best—delivering value to their clients.