Corporate report

Update to the impacts of the 2021 off-payroll working rules reform in the private and voluntary sectors

Updated 27 February 2025

Executive summary 

In December 2022 HM Revenue and Customers (HMRC) published our own analysis on the impacts of the 2021 off-payroll working rules reform in the private and voluntary sectors. This report provides an update to this analysis, based on the latest data available.  

Our initial estimates of the numbers of workers affected by the reform and the additional tax revenues generated have seen a small change, primarily due to newer data becoming available and improvements in our methodology. We have also included in this report an estimate for a further year of additional tax revenue and additional detail on the impacts of the reform, for example impacts on the number of new personal service companies (PSCs) forming, average monetary impacts for workers and a more detailed analysis of impacts across sectors.  

Analysing data from before and after the reform, we estimate around 120,000 workers are likely to have been affected by the April 2021 off-payroll reform. This includes those workers who are reported as continuing to work through their own PSC but have been deemed as an employee for tax purposes by their client, and those who have moved to become an employee of another organisation which is not their own PSC. 

We also estimate there has been a reduction in the number of new PSCs being formed, which we expect is partly resulting from the reform. We estimate around 45,000 fewer new PSCs formed around the time of the reform, up until the end of March 2022, compared to what we might have expected to happen based on historical trends. These workers may have instead chosen to work in a different way, and we expect they will have remained, or started, working as employees.  

We do not estimate there being any additional changes in how PSCs provide their services after April 2022, above what would have happened regardless of the reform. This suggests that most organisations who decided to change how they engage contractors did so around the time of the reform, and we have not seen a continued impact from clients making ‘new’ changes to how they offer their roles. 

We have seen evidence that only a small number of individuals may have moved from working through their own PSC to potentially not working over the time of the reform; and we estimate that more PSC workers have been unaffected by the reform than affected. Overall, we estimate total employments across all types of work for PSC workers have increased when comparing a point in time before the reform to a point in time after the reform. 

While we have seen changes in the way some PSC workers provide their services due to the reform, any noticeable changes in the labour market in recent years are unlikely to have been driven entirely by the reform given those impacted make up only around 1% of the total workforce. Furthermore, there are no sectors where the total number of PSC workers who changed payrolls (including those who would have changed regardless of the reform), make up more than 10% of total employment in that sector. 

The reform is estimated to have generated around £4.2 billion in additional tax, National Insurance contributions (NICs) and Apprenticeship Levy payments up until the end of March 2023, above the taxes which would have been paid without the reform.  

While the average annual tax increase per worker affected is £10,000 (including employer taxes), this does not necessarily mean that post-tax take home pay has fallen for all workers affected as some individuals have reported an increase in pre-tax incomes. Those PSCs and their workers who changed payrolls around the time of the reform tended to have above average earnings compared to the whole of the UK population. 

Readers should take the estimates set out in this publication as indicators only of the most likely impacts of the reform given the inherent challenges in this work. These are most notably:  

• we are unable to completely isolate the impact of the off-payroll reform from other events which may have driven significant changes in the labour market such as the coronavirus (COVID-19) pandemic 
• there is no legal definition of a PSC so we are unable to definitively identify in data those who should be affected by the rules

However, we are confident that around the time of the reform there was a change in behaviour by those most likely to be working through a PSC prior to the reform, and an increase in overall tax paid by this group. This is based on objective criteria and we have worked with external stakeholders to ensure our approach to understanding the impacts of the reform is as robust as possible. Our methodology, including any changes to the analysis published in December 2022, is explained later in this report.  

Introduction  

The off-payroll working rules, commonly known as IR35, were introduced in April 2000 to ensure that people working like employees, but through their own company or other intermediary, pay broadly similar Income Tax and NICs as employees.  

To improve compliance, administrative reforms in 2017 and 2021 shifted the responsibility for operating the rules from a worker’s intermediary (often a personal service company ‘PSC’) to the client engaging them, unless the engagement is with a small client outside the public sector. 

Understanding the impacts of the reform continues to be a priority for HMRC. In December 2022, we published HMRC commissioned external research and our own analysis on the impacts of the reform in the private and voluntary sectors. This report provides an update to our published analysis to account for the latest data available and includes an updated methodology of our approach. It includes estimates on:  

• changes to the way workers provided their services 
• monetary impacts for workers 
• additional tax revenue generated 

Our December 2022 report also included insights on the collective costs incurred by client organisations implementing the reform and the support and education HMRC provided to support customers. We have not sought to update these findings as we do not have any additional evidence to carry out this exercise. 

The outcomes of our evaluation and monitoring work helps us to target education and support to help customers to comply with the rules; and helps us to explore any opportunities to improve the way the rules work in practice. Our approach to understanding the impacts of the reforms follows our published evaluation framework which commits to undertaking evaluation in a proportionate and transparent way.  

As the analysis set out in this report suggest that most organisations who decided to change how they engage contractors did so around the time of the reform, we are not intending to publish any further updates to this report. 

Findings 

Changes to the way workers provide their services  

To estimate the number of workers that have been affected by the reform, we have identified 3 groups of workers. These include:  

• workers who have moved to become an employee of another organisation which is not their own PSC 
• workers who are reported as being deemed as an employee for tax purposes by their client and are continuing to work through their own PSC (‘inside the off-payroll working rules’)  
• workers who are deterred from entering or returning to work through their own PSC. We do not know who they are individually but see a reduction in the numbers newly on their own PSC payrolls. In the December 2022 report we noted this was an expected impact of the reform, but we did not quantify the impact due to full data being unavailable 

We have also identified some workers who are reported as being deemed an employee for tax purposes by their client but who do not appear to be associated with a PSC, so may have mistakenly been reported. These are not included in our estimates, but further detail on this group is set out in the methodology section of this report (in ‘limitations to identifying a PSC population’).  

The overall number of workers affected  

We estimate 280,000 workers have moved from their own PSC payroll to being paid by another organisation’s payroll between October 2019 to March 2022 (including those who became deemed employees). Of these, we estimate around 40% have moved because of the reform, with the others being those who would have moved even in the absence of the reform.  

These estimates are broadly in line with those published in December 2022.  

We also expect there will be some workers who may have started working through a PSC around the time of the reform but now, due to the reform, have chosen to work in a different way and we expect they will have remained, or started, working as employees.  

We estimate around 45,000 fewer workers have started to work through a PSC between April 2020 and March 2022, compared to what we might have expected to happen based on historical trends. As noted earlier, we are unable to completely isolate the impact of the reform from other events which may have driven significant changes in the labour market, and this estimate in particular carries a possibility of including some impacts from wider labour market changes.  

Table 1: Estimated numbers of workers who may have been affected by the reform, broken down by years

	October 2019 to March 2020	April 2020 to March 2021	April 2021 to March 2022	Total[footnote 1]
Total number of PSC workers who have changed payroll, excluding deemed employees	55,000	105,000	110,000	270,000
Number of PSC workers who are deemed employees	0	0	10,000	10,000
Number of PSC workers who would likely have changed payroll anyway	35,000	65,000	65,000	160,000
Total number of PSC workers who have likely changed payroll as a result of the reform	20,000	40,000	55,000	120,000
The reduction in the number of new PSCs	0	20,000	25,000	45,000

In addition, we estimate around 3,000 extra workers have stopped working through their own PSC payroll and are working as a sole trader, above what might have happened without the reform. We have reported these separately as these impacts weren’t observed until the tax year 2022 to 2023.  

Changes in workers not affected by the reform 

There are also groups of workers where we do not believe the reform has had a sizeable impact. Any changes to how these groups work around the time of the reform is in line with historic trends (unless otherwise stated we have analysed trends from April 2016 to March 2023). 

Workers changing behaviour in tax year 2022 to 2023 

We estimate around 70,000 workers moved from working through their own PSC payroll to another organisation’s payroll between April 2022 and March 2023. This is of a similar scale to those who have historically changed payrolls in any given year and to what we might have expected to happen this year, regardless of the reform.  

This suggests that most organisations who changed how they engage contractors did so around the time of the reform, between the period October 2019 and March 2022. We are not seeing a continued impact from clients making ‘new’ changes to how they offer their roles.  

Workers retiring or leaving payrolls altogether  

We estimate that only a small number of workers may have stopped working through their own PSC payroll due to the reform and we have not been able to identify the activity they have moved into.  

The numbers in this group remained throughout the reform years at the level seen pre-reform, hovering at around 25,000 a year. However, we did estimate an increase of around 12,000 above this in the year 2022 to 2023. 

This does not include those individuals who may have moved to work as a sole trader. As noted above, we expect an additional 3,000 workers to have moved from working through a PSC to work as a sole trader in 2022 to 2023, on top of what might have happened without the reform. 

We have included the year 2022 to 2023 to allow for individuals who may have ceased work following the reform but continued to draw income from their PSC for a number of years or may have experienced declining pay following the reform ahead of finally ceasing work through their PSC.  

We are unable to identify the activity that these additional 12,000 workers have moved into. This may include, for example, those who have retired without a pension, those who are on parental leave or on long-term sickness, those who have left work to study, or those who have become tax non-resident. Some of these may also have received some sole trader income throughout the period of the reform, sometimes alongside their PSC income.  

We have analysed a number of other potential reasons why a worker may have left their PSC payroll and not moved to another organisation’s payroll and found no additional changes compared to what we might have expected to happen without the reform. These include those who have died, moved to become a partner, have a home address overseas, or moved onto a pension payroll. For example, we estimate around 11,000 to 14,000 PSC workers move from their own PSC payroll to a pension payroll in any given year, which did not change around the time of the reform and has remained within this range for a number of years. 

How workers provided their services following the reform 

We estimate the majority who have changed payrolls around the time of the reform have done so by becoming an employee of an organisation that isn’t their own PSC (96%), with a minority having been reported as a deemed employee for tax purposes (4%). These estimates are broadly in line with our initial estimates published in December 2022. 

Within this, the majority (69%) moved to organisations that are not agencies or umbrella companies (which could include becoming an employee of their client), with a further 18% moving to an umbrella company and 13% moving to an agency.  

These proportions do not include those who may have decided to not start working through a PSC because of the reform. They are also based on the overall number of workers who moved around the time of the reform. This is because for most circumstances we can’t distinguish between workers who would have moved regardless of the reform and workers who moved due to the reform.

However, we expect that many of the workers who changed payrolls from their own PSC to an umbrella company did so as a result of the reform. We have seen a marked increase in the use of umbrella companies over the time of the reform, which we think has been substantially driven by the reform, either due to those who moved to working through an umbrella company as their main role (captured in these estimates), or those who may have taken up working through an umbrella company as a secondary role (as explored in our estimates in Annex B). 

We have also looked into the number of workers who have moved to an organisation which offers a disguised remuneration scheme. We estimate around 1,400 workers (0.5%) moved to an organisation that HMRC has identified as offering a disguised remuneration scheme between October 2019 and March 2022. There will be some overlap between this population and those who have moved to umbrella organisations.  

That workers are engaged by an employer HMRC believes to be offering a disguised remuneration scheme does not necessarily mean that they all went on to use a disguised remuneration scheme. HMRC sees employers where some workers take up disguised remuneration and others do not.  

HMRC continues to tackle the use of disguised remuneration schemes and is focussed on stifling the supply and demand of these schemes by tackling the promoters who sell them and by dissuading workers from entering into them.  

The chart and table below show the populations of workers impacted in different ways, as described above.  This includes those who may have moved from working through a PSC payroll to another organisation’s payroll in more than one year, so the total number of ‘employment moves’ is slightly higher than the total number of workers impacted. 

The estimates are broadly in line with our initial estimates published in December 2022. 

Table 2: Type of organisation that workers moved to when they moved from their own PSC payroll around the time of the reform 

	Number of workers (October 2019 to March 2022)	Proportion of those who have changed how they provide their services
Workers who have moved from their own PSC payroll to an umbrella payroll	54,000	18%
Workers who have moved from their own PSC payroll to an agency payroll that is not also an umbrella	38,000	13%
Workers who have moved from their own PSC payroll to a different type of organisation’s payroll which is not an agency or umbrella company (including client)	204,000	69%
Workers who have moved from their own PSC payroll to an organisation offering a disguised remuneration scheme  (there will be some overlap between this population and other populations, most notably the umbrella company population as the majority of disguised remuneration schemes are offered by non-compliant umbrella companies)[footnote 2]	1,400	0.5%
Workers who have been reported as deemed as employed for tax purposes by their client (there will be some overlap between this and other populations. For example, a worker who is reported as a deemed employee by an agency may appear in this population as well as the population of those who have moved to an agency’s payroll)	8,000	3%
Total number of ‘employment moves’ by workers who moved from their own PSC payroll to another payroll	300,000	Not applicable
Total number of workers who have moved from their own PSC payroll to another payroll (including deemed employees)	280,000	Not applicable

Chart 1: The types of organisations that workers moved to when they moved from their own PSC payroll around the time of the reform, broken down by years. 

The chart above breaks down the types of organisations that workers moved to by years. It shows similar information as set out in tables 1 and 2 in this report and shows:  

• the majority of those who moved payrolls did so in tax year 2021 to 2022, with smaller moves in the 2 tax years before this
• the majority of those who moved payroll in any of the tax years between October 2019 and March 2022 did so by moving to another organisation’s payroll which was not an agency or umbrella company, followed by moves to umbrella companies and then agencies

These estimates show the first type of organisation that a worker moved to when leaving their own PSC payroll. We expect some of the workers who changed how they provide their services at the time of the reform, will not have continued to work in that way over the longer term, although we expect the roles offered by clients are likely to continue to be offered in the same way but be filled by different individuals.  

In addition to these estimates, we have also carried out separate analysis which compares the overall number of employments among users of PSCs before the reform (in September 2019) and after the reform (in April 2022). This shows overall trends in the types of organisations PSC users may work in and reflects, among other things, those workers who have reverted back to working through their own PSC after initially changing at the time of the reform.  

This analysis estimates a reduction in PSC use overall; a noticeable increase in umbrella company use; and an overall decline in the use of organisations who offer disguised remuneration schemes. These estimates can be found in annex B. For information on wider trends in the use of disguised remuneration schemes, the Marketed Tax Avoidance report sets out the latest data on disguised remuneration schemes overall. 

We have also looked in more detail at those who were reported as a deemed employee in the tax year 2021 to 2022 (including those who have been reported as a deemed employee but who we have been unable to match to a PSC). We estimate a broadly even split between working who are deemed employees for a short amount of time and those who are deemed employees for a longer amount of time. We estimate 34% work as a deemed employee for less than 3 months, 39% for between 3 and 11 months, and 27% for at least a year. 

This is a shift from the tax year 2020 to 2021, which estimated more workers were deemed employees for a very short amount of time: with 52% working in this way for less than 3 months, 33% for between 3 and 11 months, and 15% for more than a year. We expect this shift may be driven by a better understanding of how to correctly report workers who have been deemed employees, rather than necessarily a change in behaviour between those deemed employees in 2020 to 2021 (public sector), and those deemed employees in 2021 to 2022 (mix of public and private sector). 

Wider context  

Any noticeable changes which may have occurred in the labour market in recent years are unlikely to have been driven entirely by the off-payroll reform, given other events which may have driven significant labour market changes. Furthermore, our estimates suggest the impacts of the reform make up only a small proportion of the total workforce and are unlikely to play a major part in overall changes in the total workforce.  

The numbers of workers estimated to be affected by the reform make up less than 1% of the total workforce. During the period of the reform (October 2019 to March 2022), the Office for National Statistics (ONS) estimated the total workforce to be over 32 million at any point in time. This has increased since the pandemic to 33.2 million in the 3 months to January 2024, above pre-pandemic levels by 85,000 but 151,000 below the record high from the 3 months to April 2023. 

The number of workers affected by the reform make up a slightly larger proportion of the total self-employed workforce, but still only around 3%, with the ONS estimating the total self-employed workforce to have peaked at 5 million at the end of 2019, but has since fallen following the pandemic to 4.2 million where it has remained relatively stable, although the Labour Force Survey reweighting has uplifted the self-employment estimate slightly to 4.3 million in the 3 months to January 2024.  

The ONS reported an increase in the number of individuals self-reporting as employees and a decrease in the number of individuals self-reporting as self-employed during the same time period that this analysis covers. Our estimated impacts of the off-payroll reform would account for some of the shift the ONS has estimated has taken place from workers self-reporting as self-employed to employed over the time period, but not all^{[footnote 3]}.  

The number of workers affected by the reform make up a slightly larger proportion of the workforce estimated by the ONS who self-report as temporary workers, making up around 8% of this population.  

As well as those impacted by the reform making up only a small proportion of the total workforce, we also estimate they are only a subset of the wider potential PSC population, and that more PSC workers have been unaffected by the reform than affected. Our estimates suggest a reduction in PSC employments of potentially as low as 14% between September 2019 and April 2022.   

In line with this, we have not seen a marked change in the overall number of PSCs in recent years, with there being an overall population of between 1 million and 1.2 million PSCs in any given tax year between 2015 to 2016 and 2021 to 2022. Within this though we did see a general upward trend in PSC use peaking in 2019 to 2020, before declining.  

Information on how we have identified the wider PSC population, including any limitations, is explained in the methodology section of this report. 

Sectors of workers and their PSCs  

All sectors have seen more workers than in previous years move from working through their own PSC to working on another organisation’s payroll, although for every sector the total number who changed payrolls made up less than 10% of the total employment in the sector. 

The sectors with the highest number of workers who have moved to another organisation’s payroll are professional, scientific and technical; and information and communication.  

Further detail on the sector impacts is set out in annex A.  

Monetary impacts on workers and their PSCs 

We have analysed the incomes of the PSC workers who changed payrolls around the time of the reform. We estimate that those PSCs and their workers tend to have above average earnings when compared to the whole of the UK population, with pay and company profits of those PSCs impacted being higher than HMRC’s estimated average gross earnings of employed or self-employed workers.  

We also estimate that of those sectors with the highest number of PSC workers impacted by the reform, the workers who moved onto the payroll of umbrella companies or agencies tended to have higher earnings compared to those workers who moved onto the payroll of other types of organisations. 

We have also analysed data for the average changes in both tax paid and pre-tax reported incomes for PSC workers who changed payrolls around the time of the reform.  

Our analysis estimates that for those who moved to another organisation’s payroll around the time of the reform, the average annual increase in tax, NICs and Apprenticeship Levy paid by the worker, their PSC and their employer or deemed employer was around £10,000. This is broadly evenly split between the additional taxes paid by the worker (above and beyond what they would have paid through their PSC), and the 2 tax heads, Employer NICs and Apprenticeship Levy, which are the responsibility of the employer. 

Chart 2: The average change in tax paid per worker, broken down by years and type of tax. 

The chart above shows:  

• the average annual increase in tax, NICs and Apprenticeship Levy is £10,000 in 2021 to 2022. This is made up primarily of additional Income Tax and NICs, with smaller reductions in Corporation Tax and Dividends Income Tax  
• the majority of the employer liabilities are made up of employer NICs, with only a small amount of Apprenticeship Levy
• there is a much smaller impact in 2019 to 2020 as these estimates show a part year change only

However, along with changes in tax paid, reported pre-tax incomes have also changed for some workers. Research published in December 2022 on the effects of the reform shows that clients reported that pre-tax fees paid to off-payroll contractors had not changed for the majority, but where fees had changed, they were more likely to increase than decrease, with around 1 in 4 offering increases in pre-tax fees.  

Our analysis indicates an overall average increase in pre-tax incomes for those who changed payrolls around the time of the reform.  

Chart 3: Average gross pay and profits of all workers who moved from their own PSC payroll to another organisation’s payroll around the time of the reform^{[footnote 4]}

The chart above shows an increase in the overall amount of company profit and PAYE gross pay combined in tax years 2020 to 2021 and 2021 to 2022, compared to the 4 previous tax years. This is made up of increases in PAYE gross pay and is accompanied by a reduction in company turnover and profit. 

The overall average increase in reported pre-tax incomes is of a similar scale to the average increase in tax paid and could indicate that some workers have seen minimal changes in take home pay following the reform. 

However, this interpretation of some workers seeing minimal changes to take-home pay should be treated with caution, as there are several reasons why some workers may have seen a reduction in take home pay due to factors that we cannot observe from available data. These include:  

• workers may have reported lower profits before the reform due to the ability to claim allowable deductions, which may no longer be available once the worker has changed how they provide their services, yet some of these expenses may or may not continue to exist
• the possibility that our estimates for the average tax paid are low. This is due to our estimates being based on all those who changed payrolls around the time of the reform, rather than just those who changed because of the reform, and we cannot distinguish between the 2 groups. There is a likely chance that some of those who changed because of the reform may have seen a larger than average tax change

Additional tax revenue 

We estimate an additional £4.2 billion has been generated in tax revenues overall in the period October 2019 to March 2023 as a result of the reform. This is based on those workers who have moved to another organisation’s payroll because of the reform or have been deterred from working through a PSC during the period October 2019 to March 2022.   

Table 3: The overall change in tax revenues broken down by years (on a National Accounts Basis) 

	October 2019 to March 2020	April 2020 to March 2021	April 2021 to March 2022	April 2022 to March 2023	Total
Total tax revenues	£50m	£0.7bn	£1.9bn	£1.6bn	£4.2bn

The higher revenue in 2021 to 2022 is due to a combination of increased PAYE taxes for this year, as well as the continued payment of Corporation Tax for previous years’ work. 

In line with the average impacts on individuals shown in chart 2, the majority of additional tax revenues come from increases in Income Tax and NICs.  

Chart 4: The overall change in tax revenues, broken down by years and by changes in individual tax heads 

The chart above shows the majority of additional tax revenues is from increases in Income Tax and NICs, with smaller reductions in Corporation Tax and Dividends Income Tax. Only a very small amount of the additional revenues is from Apprenticeship Levy. 

In line with our estimates for how workers have been affected by the reform in table 2, the majority of the additional tax revenue is from workers who moved to become an employee of another organisation that was not their own PSC. A smaller amount of overall tax revenues is generated from those who were deterred from starting a PSC, and a minority from those who were deemed an employee by their client. This is shown in the chart below. 

Chart 5: The overall change in tax revenues, broken down by year and by how the worker was affected by the reform 

The estimated tax revenue raised is higher than the estimates in our analysis published in December 2022. This is primarily due to including an estimate of the number of workers who have been deterred from starting a PSC, as well as small improvements in our methodology, which is set out later in this publication. 

This is also higher than we estimated ahead of the reform in the Tax Information Impact Note (TIIN) published in spring 2021, which estimated revenues of around £1.6 billion up to the end of March 2023. The majority of the additional revenues identified in our analysis comes from more changes taking place ahead of the introduction of the reform than we had expected, and higher continued revenues than expected in 2022 to 2023.  

Methodology 

To understand the impacts of the reform we have used a range of data sources and have engaged with several external stakeholders over the methodology behind our analysis to ensure its approach is robust.  

Changes to the way workers provide their services 

It is an expected response to the reform that organisations and workers will consider the best way for workers to provide their services whilst being compliant with the tax rules. 

This means that the amount of tax due may change, as people who work through their own limited company (a PSC) on a self-employed basis can pay a lower amount of tax than employees, by making use of the different allowances and rates available in PAYE Income Tax and NICs, Self Assessment Income Tax and NICs, Corporation Tax and Tax on Dividends. 

The diagram above shows some of the expected ways a worker may work following the reform: 

• workers may continue to work through their  PSC whilst being deemed as employed or self-employed for tax purposes by their client. The PSC may engage directly with the client or through an agency, and if deemed employed for tax purposes the client or agency will operate PAYE. If deemed self-employed for tax purposes the PSC is responsible for paying tax and NICs 
• workers may stop working through their PSC and so the off-payroll working rules will not apply. They may: 
  • move to work through an agency and the agency will consider the normal employment status rules or the agency legislation 
  • move to work through an umbrella company, where they would usually be an employee of the umbrella company 
  • move to work directly for the client or another organisation and the client or other organisation would consider the normal employment status rules 

There is no legal definition of a PSC and it is not possible to identify directly from HMRC data which companies are operating as PSCs or which PSCs provide services to medium- and large- sized clients and so may be affected by the reform.  

To identify workers most likely to have been impacted by the reform we have applied a number of objective criteria (as agreed with the Office for Budget Responsibility during its scrutiny of the policy costings) to data from Companies House, PAYE, Self Assessment tax returns and Corporation Tax returns to identify those most likely to be working through a PSC. 

These criteria include limits on turnover (£500,000), profits (£500,000), fixed assets (£150,000), the number of directors and employees a business has (one or 2 directors or employees), and whether a worker is on their own PSC payroll. The assumptions for turnover, profits and assets are based on the tax year 2015 to 2016 figures, index-linked. This is to align with the way we identified potential PSCs in our original estimates ahead of the public sector reform.  

Since we published our analysis in December 2022, we have made 2 small changes to the methodology, which has resulted in a slightly larger population of likely PSCs being identified compared to our previous estimate in our December 2022 report. These include improvements to the way we match data from Companies House to our internal data and a change to applying the asset threshold in our criteria from all assets to only fixed assets.

This change better accommodates those PSCs who may have held some of their income within their company for a number of years as current assets, which in our previous methodology would have put them outside of our assumptions and meant that we missed any impacts on this particular population. 

Using the above methodology we have identified a population of around 1.5 million individuals who we estimate are likely to have been working through a PSC at some point during the period April 2015 to March 2022.  

From this population we have identified those workers who have moved from working through their own PSC payroll to another organisation’s payroll during the period October 2019 to March 2022. This is following insight from external stakeholders that organisations and workers made changes to the way contractors were engaged as early as 18 months before the introduction of the reform. 

Our estimates include those who are reported as continuing to work through their PSC but have been deemed as an employee for tax purposes by their client, and those who have stopped working through their PSC and have moved to become an employee of an organisation which is not the PSC they were working for before the reform. For those who have been deemed as an employee for tax purposes by their client, some of these were identified as those who moved their main employment following the reform, and others have been identified as reported as a deemed employee at some point throughout the tax year 2021 to 2022 who we have been able to match to a PSC. 

The number of workers who have changed payrolls is reduced to account for those who are likely to have moved payrolls regardless of the reform. This has been done based on the average number of workers who have worked through PSCs and changed payrolls in previous years. Given other events in the labour market at the same time, most notably COVID-19, it is not possible to know for certain the extent that the off-payroll reform has caused any changes and so this analysis should only be taken as an indicator of likely impacts. 

It is also likely that there will be some workers who have not started working through a PSC because of the reform, and instead have chosen to work in a different way. We have included estimates for the reduction in new PSCs for the period October 2019 to March 2022, which we were not able to include in our previous publication due to a lag in the data available. To estimate the reduction in new PSCs we have identified the average number of new PSCs established in the years prior to the reform and compared this to the number of new PSCs established around the time of the reform. Readers should take caution as it is unlikely that any change in the number of new PSCs will be driven solely by the off-payroll reform.  

It is not possible to identify in HMRC data whether those who have changed payrolls as a result of the off-payroll reform should have been deemed as employed for tax purposes or self-employed for tax purposes when working through their PSC. 

Our analysis is based on the first type of organisation or circumstance that a PSC worker moves to; and while individual workers may flow in and out of roles, we expect clients to continue to offer roles in a similar way going forward. 

Limitations to identifying the PSC population  

While we have engaged with a number of external stakeholders over the methodology behind our analysis, we recognise there are still likely to be some limitations to the criteria we use to identify PSCs.  

The outcome of this means our estimates for the overall PSC population may include some workers which are not PSCs and miss some potential PSCs. In particular, our estimates of the overall PSC population may include some workers who are not the primary worker and are, for example, spouses. Although, we expect the population we have identified as changing payrolls around the time of the reform is less likely to include non-PSCs than our overall population, as the impacts we have observed reinforce the likeliness of those workers being PSCs.  

We have looked at a number of assumptions which, if changed, may result in a difference to the estimated impacts from the private sector reform. These have been included below. 

We have also sense checked the direction and scale of our estimates with a different way to analyse the PSC population, which is set out in annex B.   

Those reported through the Real Time Information (RTI) system as deemed employees but whom we can’t match to a PSC 

Our central estimates of those impacted by the reform do not include workers who have been reported to HMRC as a deemed employee by their client where we have not been able to identify them as having their own PSC. This may be because they have been identified as a deemed employee in error, have a PSC but fall outside of our criteria for identifying PSCs or because they are working through non-incorporated intermediaries. Our central estimate also does not include those who were reported as a deemed employee for less than 3 months, to allow for any workers who may have been reported as a deemed employee in error.  

In 2021 to 2022, 8,000 workers were first reported as a deemed employee who we can match to a PSC, and who are included in our central estimates of impacts. Half of these were identified through our analysis which determined workers who had moved their main employment after the reform, and half were not identified through this approach but had been reported as a deemed employee at some point during the year. 

A further 22,000 workers were reported as a deemed employee who we have not included in our central estimates. This includes 10,000 who were reported as a deemed employee for less than 3 months and 12,000 who do not appear to be working through a PSC. The majority of those who do not appear to be working through a PSC we have been unable to match to a company so may be reported in error or may be working through an unincorporated intermediary. A small number we have been able to match to a company, but which falls outside of our criteria, suggesting we may be excluding a small number of impacted workers from our analysis.   

This group, who we have not included in our central estimates, will include those who are providing their services to private, voluntary and public sector clients. Therefore, even if this group are not mistakenly reported, they will not all be affected by the April 2021 reform.  

We have also not included any workers who were reported as deemed employees during the tax year 2020 to 2021, as this was ahead of the private sector reform coming into effect. While we estimate some organisations made changes to how they engage PSC workers ahead of April 2021, the legislation to determine a PSC worker to be a deemed employee only came into effect from April 2021. Therefore, any deemed employees identified through our analysis ahead of April 2021 are likely to be working in the public sector and so have been excluded from the impacts reported here.  

Those who changed how they work or pay tax between April 2022 and March 2023 

As noted elsewhere in the report, we have not included impacts from workers changing how they provide their services between April 2022 and March 2023.  

This is based on analysis which shows that changes in behaviour for 2022 to 2023 follows a similar pattern to changes in behaviour in the years prior to October 2019 (when we saw the first impacts of the reform). This aligns to our expectation that most organisations will have decided to change how they engage contractors around the time of the reform; and while contractors might flow in and out of roles there won’t be further substantial shifts in how roles are offered by organisations due to the reform in future years.  

Partnerships and other intermediaries  

The off-payroll working rules apply to other types of intermediaries, as well as PSCs. We have not included these in the analysis because we expect the impacts of the reform to be small on those populations in comparison to the number of workers working through their own PSCs. We, therefore, do not think the scale of impacts reported would change substantially by including these groups. 

Those not on their own payroll  

To identify those most likely to be working through PSCs we have identified those that pay themselves through their own payroll. As there are tax and other benefits to workers paying themselves a small salary through their own PSC, we expect that PSCs are more likely to fall into this group. However, some PSC workers may not do this and may instead pay themselves only through dividends or capital distributions, and these would be excluded from our population.  

Furthermore, in order to identify those on their own payroll, we have identified those who use part of their personal allowance for their PSC payroll pay. This means we may have excluded some of those who work through their own PSC but not as their ‘main’ job. This could mean that we have underestimated the overall number of workers who have been impacted, although we do not think it is likely to have a substantial impact on the overall additional tax revenues estimated.   

We have identified a further 860,000 workers who met all of our other criteria for identifying PSCs at some point between April 2015 and March 2022, but who do not pay themselves through their own payroll using their personal allowance. If this population were PSCs impacted by the reform, we would expect to see movements to new payrolls in higher numbers over the reform tax years 2019 to 2020 and 2021 to 2022. However, the number of this group who started other non-PSC work fell each year around the time of the reform, so does not appear to have seen any impacts from the reform.  

Profit and turnover threshold 

To identify the most likely workers to be PSCs we have applied a profit and turnover assumption of £500,000 (based on 2015 to 2016 figures, index-linked). If we remove these thresholds, we identify a larger population of potential PSCs, but are also more likely to include workers who are not PSCs.  

We have analysed the scale of potential PSCs who meet all our other PSC criteria but have a turnover above this threshold and estimate annual turnover tails off above about £250,000, and above £500,000 there is a negligibly small number of companies, and they are harder to distinguish from other small businesses. Therefore, we think the threshold strikes the right balance between minimising the risks of including non-PSC businesses in our analysis and excluding some higher earning PSCs. 

COVID support payments  

We have not included those who claimed COVID Job Retention Scheme (CJRS) payments in any of the analysis because they saw atypical variations in turnover and taxes. This reduced the population in our comparison group for calculating additional tax revenues by about 20%. For that reason, they have not been used as part of the comparison of tax levels with PSCs whose owners switched onto other payrolls, but they are included in the wider population of PSCs identified. 

Additional revenue generated 

To estimate the additional revenue generated from the reform we have analysed the changes to tax paid by the population identified as having moved from their own PSC payroll to another organisation’s payroll.  

We have also estimated the change to tax paid by the population who did not set up a new PSC due to the reform. We have estimated the additional tax paid by these workers to be of the same scale as the group of workers who moved from their own PSC payroll to another organisation’s payroll, assuming that those who choose not to set up a new PSC instead choose to work on the payroll of another organisation.  

The methodology for how these groups have been identified is set out above. 

We have set out estimates for additional tax revenues raised for the period October 2019 to March 2023. This is based on the population who changed behaviour, or were deterred from starting a new PSC, in or before March 2022, and assumes that those roles continue to be offered in the same way from April 2022 onwards.  

This includes the additional PAYE Income Tax and NICs paid, and the additional Apprenticeship Levy paid by organisations. We have estimated this based on most employers of former contractors being liable for Apprenticeship Levy. For those that are, the amount due is 0.5% of the new employee’s salary, except for those few cases where that would be more than the total the employer paid. 

It also includes the reduction in Corporation Tax, Self Assessment Income Tax and NICs, Tax on dividends, Value Added Tax (VAT) and Capital Gains Tax.  

To estimate the impacts on VAT we have considered those who work in the financial and insurance sectors. This is because financial services and insurance are VAT exempt; however, an organisation selling such services may still pay VAT on services provided to it by a PSC, which it cannot reclaim. If a worker moves from their PSC payroll to the payroll of an organisation, VAT is no longer chargeable.  

To estimate the reduction in VAT, we identified workers who moved from a VAT-registered PSC payroll to the payroll of an organisation in the finance and insurance sectors. We applied estimated rates of unrecoverable VAT to the turnover of these PSCs prior to the workers’ moving payroll. Then we reduced the estimate to account for those who are likely to have moved payrolls regardless of the reform, in line with the reduction in total numbers of workers moving payroll.    

Our estimates for changes to Capital Gains Tax are small but occur if a company retains profits instead of paying them as dividends, the value of its share’s increases. When the company is sold or liquidated, the extra value of those shares becomes a capital gain. We have estimated the amounts by comparing the gains declared by affected groups with the gains reported by a control group, then applying the current tax rate and reliefs. 

In our last publication, we made an assumption when estimating the reduction to Corporation Tax, self-assessed Income Tax and Tax on Dividend Payments for the year 2021 to 2022 as full data was not available. Data is now available for this year, but we have made an assumption for the year 2022 to 2023.  

Changes in Apprenticeship Levy, self-assessed NICs and Capital Gains Tax were not included in our previous publication but are included here as an improvement to our methodology for estimating the total change in tax revenues.  

Adjustments have been made to the total amount of tax paid per worker to account for changes to tax paid which may have happened regardless of the reform. This is based on analysis of changes to tax paid by a comparison group of individuals who have remained on their own PSC payroll before and after the reform. 

The revenue identified is on a tax National Accounts basis which means the estimates align to the time period when the activity takes place which gives rise to the tax owed to HMRC, not when the tax is collected. The estimates account for inflation, which has a larger than negligible impact on the estimates in the later years of the reform impacts and does not adjust for changes in tax rates introduced since the 2021 reform.

Annex A: Sector analysis  

We have analysed data on which sectors have seen the largest impact on the use of contractors, based on the sector the PSC reports working in. This does not include analysis of the sector of the client or employer and is based on the overall number of PSC workers who changed payrolls, whether or not that was due to the reform or would have happened regardless. 

Changes to the way workers provide services by sector  

We estimate a higher number of workers changed payrolls across almost all sectors during the reform than before it. The sector with the highest number of workers who have moved to another organisation’s payroll over the reform are professional, scientific and technical, and information and communication. 

The table and chart below show the numbers of workers, by sector, who have moved to another organisation’s payroll over the reform period. They also compare the number of workers who moved from their own PSC payroll in the year 2021 to 2022, the year of the largest impacts of the reform, to a pre-reform year 2018 to 2019. 

Table 4: The total number of workers who moved from their PSC payroll to another organisation’s payroll, broken down by sectors for comparison years and shown as a proportion of the total who changed payrolls (in brackets the proportion of those who changed payroll by sector) 

	Total number who changed payrolls between October 2019 and March 2022[footnote 5]	Total number who changed payrolls in tax year 2021 to 2022[footnote 6]	Total number who changed payrolls in tax year 2018 to 2019
Professional, scientific, technical activities	97,000 (30%)	44,000 (29%)	23,900 (29%)
Information and communication	79,500 (24%)	32,600 (22%)	15,600 (19%)
Administrative and support services	30,800 (9%)	13,400 (9%)	9,400 (11%)
Construction	26,500 (8%)	13,600 (9%)	8,100 (10%)
Transportation and storage	20,500 (6%)	13,700 (9%)	4,100 (5%)
Wholesale and retail trade; repair of motor vehicles and motorcycles	13,500 (4%)	6,500 (4%)	5,000 (6%)
Other service activities	10,100 (3%)	4,700 (3%)	2,400 (3%)
Human health and social work activities	9,700 (3%)	4,800 (3%)	3,200 (4%)
Manufacturing	9,400 (3%)	4,900 (3%)	2,700 (3%)
Financial and insurance activities	6,300 (2%)	2,300 (2%)	1,500 (2%)
Accommodation and food service activities	4,900 (2%)	2,300 (2%)	1,900 (2%)
Real estate activities	4,600 (1%)	2,300 (2%)	1,400 (2%)
Arts, entertainment and recreation	4,400 (1%)	2,000 (1%)	1,300 (2%)
Education	3,700 (1%)	1,700 (1%)	1,300 (2%)
Agriculture, forestry and fishing	700 (0%)	400 (0%)	270 (0%)
Mining and quarrying	700 (0%)	400 (0%)	180 (0%)
Public administration and defence, compulsory social security	400 (2%)	200 (0%)	90 (0%)
Electricity, gas, steam and air conditioning supply	400 (0%)	200 (0%)	100 (0%)
Water supply, sewerage, waste management and remediation activities	300 (0%)	100 (0%)	120 (0%)
Unclassified	1,700 (1%)	700 (0%)	400 (0%)

Chart 6: The total number of workers who moved from their own PSC payroll to another payroll by sector, comparing a year of the reform to a pre-reform year  

This chart shows a comparison between the number of people who moved from their own PSC payroll in 2021 to 2022, by sector, compared to 2018 to 2019. The information is also included in the table above.  

The types of organisations workers move to by sector 

We have analysed any noticeable differences between the types of organisations that workers moved to, broken down by sectors. The charts below show the types of organisations that PSC workers moved into around the time of the reform, and in comparison years before the reform, broken down by sector. 

Chart 7: The types of organisations workers move to by sector 

Chart 8: The types of organisations workers move to by sector before the reform (covering the tax years 2016 to 2017 and 2018 to 2019) 

The above 2 charts show:  

• in all sectors, it was more common for workers to move to an organisation which was not an umbrella company or an agency than it was to move to an umbrella company or agency  
• however, when compared to typical movements in years before the reform, it was more common to move to an umbrella company or agency after the reform among almost all of the sectors which have seen the largest movements. These are most notably professional, scientific and technical; information and communication; administrative and support services; construction and transport and storage
• the information and communication sector had the highest number of workers who changed payrolls move to an umbrella company compared to other sectors. It also had the largest proportion of those who changed payrolls move to an umbrella company, although this was still only around a third of those workers in that sector who moved payrolls
• the transportation and storage sector had the largest proportion of those who changed payrolls move to an agency compared to other sectors, although this was still less than half of those workers in that sector who moved payrolls

We have also analysed those reported as a deemed employee and found they were more likely to work in professional, scientific and technical; Information and Communication or human health and social care than in other sectors. 

Relative changes to sectors  

For every sector, the total number who changed payrolls around the time of the reform made up less than 10% of the total employment in the sector, although they may make up a higher proportion of the potential overall PSC population who work in that sector.  

As well as analysing the sectors of those who changed payrolls around the time of the reform, we have also analysed the change in total employments among the potential PSC population from a time before the reform (September 2019) to a point of time after the reform (April 2022).  

This shows that information and communication, and professional, scientific and technical saw the largest drop in the number of PSC employments between September 2019 and April 2022. Information and communication also saw the largest change as a proportion of the number of PSC employments in September 2019.  

A number of sectors saw an increase in PSC employments between September 2019 and April 2022, with wholesale and retail trade, repair of motor vehicles and motorcycles seeing the largest increase. This was both in absolute terms and as a proportion of the number of PSC employments in September 2019. Positive net changes indicate growth in the number of people on their own company payrolls, which we expect may be for reasons unconnected with the reform. 

Some sectors may have seen a larger proportional change immediately after the reform, but with workers reverting back to working through their own PSC over time. This would not necessarily appear in our analysis as a sector showing a substantial change.  

Table 5: Net change in the number of employments from September 2019 to April 2022 in different sectors among workers identified as using a PSC at some point between April 2015 and March 2022 

	Change in PSC employments between September 2019 and April 2022	Change as a proportion of the total number of PSC employments in Sept 2019
Professional, scientific and technical activities	-50,400	-22%
Information and communication	-50,000	-33%
Administrative and support services	-14,200	-17%
Transport and storage	-8,700	-23%
Manufacturing	-2,800	-8%
Finance and insurance activities	-2,500	-14%
Construction	-2,400	-2%
Mining and quarrying	-400	-28%
Activities of extraterritorial organisations and bodies	less than 30	-20%
Electricity, gas, steam and air conditioning supply	less than 30	0%
Public administration and defence, compulsory social security	30	5%
Activities of households of employers	130	19%
Education	140	1%
Other service activities	180	0%
Water supply; sewerage, waste management and remediation activities	180	11%
Human health and social work activities	200	1%
Agriculture, forestry and fishing	290	5%
Accommodation and food service activities	320	2%
Real estate activities	860	6%
Arts, entertainment and recreation	1,100	6%
Wholesale and retail trade, repair of motor vehicles and motorcycles	4,800	8%
Unclassified	-300	10%
Total	124,000	14%

Annex B: Supporting analysis  

To check the direction and scale of our estimates we have analysed the PSC population in a different way, comparing total employments from a point of time before the reform (September 2019) to a point of time after the reform (April 2022).  

This offers a different way to consider the impacts of the reform to our central approach, and we would expect the size of changes estimated to be slightly different to our central estimates. Our central method measures the first type of organisation that a PSC worker moves to, while this method measures overall employments of PSC users from before and after the reform. 

Compared to our central method, this supporting analysis:  

• does not include workers who may have started a new PSC after September 2019 but stopped before April 2022 
• does include workers who changed how they work due to the reform but have since reverted to working through their PSCs 
• does include workers who have changed employment where this is not their main role 
• does include workers who stopped working through a PSC in the years before the reform    

This analysis is based on all employments by 1.5 million workers identified as working through their own PSC at any point between April 2015 and March 2022.  

While the specific estimates from this analysis are not directly comparable to our central estimates, they do support the general direction and scale of our central estimates.  

This analysis estimates there has been an increase in the overall number of employments by this population over the time of the reform (of around 4%).  

Within this, we estimate there has been a reduction in the overall number of PSC employments (of around 130,000), and an increase in employments among this population across agencies, umbrella companies and other types of organisations.  

Of note in this analysis is the sizeable relative increase in the number of umbrella employments, with employments being around 5 times higher in April 2022 compared to September 2019. This supports our view that most of those moving to umbrella companies around the time of the reform have done so because of the reform, rather than it being evenly split between those who have moved because of the reform and those who may have moved anyway. 

Also of note is the reduction in the overall number of employments in organisations offering disguised remuneration schemes by this population when comparing points of time before and after the reform. While our central estimates suggest around 1,400 workers left their PSC to work for an organisation which offered a disguised remuneration scheme, this indicates not all remained working for that organisation over the longer term. 

Overall number of employments

Table 6: The overall number of employments in different types of organisations among workers identified as using a PSC at some point between April 2015 and March 2022. 

	Overall	PSC	Umbrella	Agency	Organisations offering disguised remuneration	Other (which could include clients)
Before the reform (Sept 2019)	1.45m	940,000	11,000	36,000	4,100	470,000
After the reform (April 2022)	1.52m	810,000	63,000	64,000	3,500	580,000
Overall change	63,000	- 130,000	52,000	28,000	- 550	110,000
% change	4% increase	14% decrease	470% increase	77% increase	15% decrease	24% increase

The charts below shows the number of employments in umbrella companies and agencies by PSC workers since 2016, and how they may have changed with the reform. 

Chart 9: Employments in umbrella companies by all potential PSC workers (at any point between April 2015 and March 2022) and PSC workers who changed payrolls around the time of the reform

Chart 10: Employments in agencies by all potential PSC workers (at any point between April 2015 and March 2022) and PSC workers who changed payrolls around the time of the reform

These charts show:  

• large increases in umbrella and agency employments by PSC workers who changed payrolls around the time of the reform. As you would expect, this then corresponds to similar changes for all PSC workers
• small increases in umbrella and agency employments by all PSC workers around the time of the public sector reform in 2017. There is not a corresponding small increase in umbrella or agency employments by PSC workers who changed payrolls around the time of the private sector reform 

This separate analysis continues to support the view that most of those who moved from their PSC payroll to an umbrella payroll around the time of the reform did so because of the reform. 

Glossary  

Agency: agencies are generally recruiters who look to supply engagers (clients) with flexible labour. There can be several agencies in the supply chain between the engager and the individual providing their labour. A worker may be an employee of the agency or not. 

Client: the organisation in which a worker is supplying their services, also sometimes known as an engager or end client. 

Contractor: an individual worker providing flexible services to an engager (client), either directly or through an agency or other intermediary. In this publication contractors are referred to as workers. 

Corporation Tax: tax paid on the profits of a business. 

Cost–benefit analysis: a way of comparing the total costs of a project or intervention with the rewards of the project or intervention. A full cost-benefit analysis might include different types of costs and benefits, such as direct, indirect, intangible and opportunity costs. 

Deemed employer: the organisation responsible for operating PAYE for workers who have been deemed as employed for tax purposes by their client. This could be a client or an employment agency in the chain. 

Disguised remuneration: tax avoidance schemes that claim to avoid the need to pay Income Tax and NICs on remuneration by paying an amount alleged to be non-taxable (often involving a loan or other payment, sometimes from a third party, which is unlikely to ever be repaid). 

Employee for tax purposes: where this publication refers to this or employed for tax purposes, it means where a client has decided a worker providing services through a PSC is working like an employee based on the general employment status rules for tax purposes. This might also be known as ‘inside the rules’ or ‘inside IR35.’ 

National Insurance contributions (NICs): mandatory contributions paid to HMRC by individuals (employee NICs) and employers (employer NICs), which can give entitlement to certain benefits and state pension. 

Off-payroll working rules (IR35): rules which ensure that individuals who work like employees, but through their own limited company or other type of intermediary, pay broadly the same Income Tax and NICs as direct employees. The rules are commonly known as IR35 and were introduced in 2000. These were then reformed for the public sector in April 2017 and for medium and large client organisations in the private and voluntary sectors in April 2021. 

Pay As You Earn (PAYE): a system of paying Income Tax and NICs in which an employer (or deemed employer) pays an individual’s Income tax and Employee NICs directly to HMRC. These are then deducted by the employer from the individual’s salary or fees. Employer NICs is then paid in addition by the employer. Also known as payroll taxes. 

Payroll: a system where PAYE is operated. 

Personal service company (PSC): a limited company which a worker typically controls and has some interest in, through which the worker provides their services. 

Real Time Information (RTI): part of the payroll process where those responsible for deducting PAYE taxes provide information to HMRC. There is a marker in RTI to identify all payments which are subject to tax as part of the off-payroll working rules reforms (ie have been deemed as ‘employed for tax purposes’). 

Research: where this publication refers to research, it means HMRC-commissioned research with an external independent research agency. 

Sector: industrial sector based on the PSC’s sector classification in Corporation Tax records, drawn predominantly from Companies House data. 

Self Assessment: a system HMRC uses to collect Income Tax and NICs from those not subject to PAYE. Individuals must complete a tax return for each tax year ending 5 April by 31 October (paper) or 31 January (online) following the end of the tax year. 

Self-employed for tax purposes: where this publication refers to this, it means where a client has decided a worker providing services through a PSC is not working like an employee based on the general employment status rules for tax purposes. This might also be known as ‘outside the rules’ or ‘outside IR35.’ 

Tax avoidance: tax avoidance involves bending the rules of the tax system to try to gain a tax advantage that Parliament never intended. It often involves contrived artificial transactions that serve little or no purpose other than to produce this advantage. 

Tax information and impact note (TIIN): the government publishes TIINs ahead of policies coming into effect, to set out the expected impacts of the changes. 

Tax on Dividends: tax paid on any dividend payments an individual receives through shares in a company. An individual can earn some dividend income each year without paying tax. 

Umbrella companies: generally accepted to mean a UK limited company which acts as an employer to a number of individuals, meeting PAYE and other requirements where operating legitimately. It signs contracts to provide the individual’s labour to engagers (clients), either directly or through another intermediary such as a recruitment agency. 

Worker: where this publication refers to worker it means an individual who is providing their services to a client or employer. They may work as an employee of an organisation or as a contractor.

1. Estimates are rounded to the nearest 5,000. Estimates may not sum to the total due to rounding and to some people appearing more than once. The people who may appear in more than one year are those who moved from their own PSC payroll to another payroll one year, before reverting back to their own PSC payroll, and then moving again to another payroll in a subsequent year. ↩

2. Data on disguised remuneration schemes is sometimes revised in future years when more schemes become known to HMRC. ↩

3. Employee numbers increased by around half a million, while self-employed fell by around 0.75 million. As the bulk of the fall in self-employed numbers took place during 2020, when other drivers in the labour market will have been impacting workers’ decisions, such as the coronavirus (COVID-19) pandemic, it is difficult to draw definitive conclusions on the extent this switch may have been caused by the off-payroll reform. On 6 September 2022  the ONS provided evidence to the House of Lords on the switch in the way workers report providing their services, including the notion that some of the shift will be a reclassification by workers while some will be an actual change. ↩

4. Findings have been standardised to 2021 to 2022 prices, using the GDP deflater. We assume that all profit is taken out as income in year whereas some workers may choose to retain this profit within their company for future years. Similarly, some workers may be drawing out pay based on a previous year’s retained profit. ↩

5. The sectors with absolute changes of less than 250 have been excluded. ↩

6. The sectors with absolute changes of less than 100 have been excluded. ↩