In the past, before becoming a tax accountant, I worked as a government tax inspector. Recently, I learned from former colleagues that HMRC is intensifying investigations into “off-payroll” workers.
The reason is clear: tax officials are targeting significant underpayments of income tax and National Insurance contributions (for employees earning over £155 per week and under state pension age), along with associated interest and penalties. These workers often operate through personal service companies, but due to the nature of their work relationships, would be considered “employed” rather than self-employed.
It’s estimated that over 1.5 million people in the UK work “off-payroll” as contractors, including in major sectors like IT, construction, transportation, and media. The NHS and schools relying on agency supply teachers are also heavy users of these arrangements.
For some workers, like an unhappy supply teacher forced to work through an umbrella company, the costs can be exorbitant – leaving her take-home pay at less than 50% of her gross wage. I’ve also seen haulage agencies insist all their workers use personal service companies, which the workers often reluctantly accept to avoid the hassle, but at a significant financial burden.
Ultimately, HMRC is cracking down on these “off-payroll” setups, which they view as attempts to avoid proper tax and employment obligations. Workers and employers engaging in such arrangements may face significant financial penalties.