As of 30 April, HMRC has updated the way self-employed workers can get clarity on their IR35 status.
The latest update to HMRC’s Check Employment Status for Tax (CEST) tool hopes to simplify the process and increase certainty – ‘modernising’ outdated elements of the tax system.
Introduced in 2017, the CEST tool is used by freelancers, contractors, and self-employed. Understanding whether you’re inside or outside IR35 is key to knowing whether you should pay tax as a self-employed individual or as an employee.
The tool can be used by workers to check the accuracy of an IR35 determination. HMRC state that they’re “committed to standing behind the outcomes of this tool where it has been used correctly.”
However, the tool has received criticism since its launch. In 2024, a Freedom of Information request revealed that the tool’s engine hadn’t been updated in five years. This led to inaccuracies in tax reporting from both businesses and the self-employed.
‘Relying solely on CEST still poses a risk’
Some IR35 experts believe these changes aren’t enough to protect the self-employed from inaccuracies – and urge contractors to not rely solely on CEST to confirm your employment status.
Seb Maley, CEO of Qdos, says: “Employment status can be a minefield and no stone should be left unturned when determining it. The sheer cost of getting things wrong from a tax perspective can be staggering.
“Changes that help users answer the questions it poses – while welcome – won’t address the elephant in the room, which is that relying solely on CEST to decide employment status still poses a risk.”
Further IR35 updates for the self-employed
The updates to the CEST tool aren’t the only recent IR35 changes that could affect contractors and the self-employed.
A recent crackdown on non-compliant umbrella companies comes as part of an update to the Employment Rights Bill. This will result in more rights for contractors working for them.
And April 2025 changes to company size thresholds have increased turnover and balance sheet totals for micro, small, and medium sized businesses.
Contractors working with businesses now reclassified as small will now be responsible for determining their own IR35 status.
More guides for contractors
- Late payment letter: how to chase late payment
- What does being inside IR35 mean?
- HMRC penalties for Self Assessment
- What is an umbrella company?
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