Today, 26 November 2025, the Chancellor of the Exchequer, the Rt Hon Rachel Reeves MP, announced the Budget.
While there were no specific announcements on the IR35 legislation, the government turned the screw on contractors by extending the freeze on income tax and National Insurance thresholds for a further 3 years. The rates of tax and National Insurance contributions will remain unchanged – the essence of a stealth tax (paragraph 4.109 of Budget 2025). The National Insurance contributions for employees and self-employed (paragraph 4.111) are essentially unchanged. Employer National Insurance contributions (paragraph 4.112) secondary threshold per employee will remain at £5,000 from “April 2028 until April 2031”. This measure will be legislated upon in “early 2028”.
The Budget contains an unwelcome increase in tax on dividend income (paragraph 4.115) – the ordinary rate of income tax payable on dividend income will increase by 2% from 6 April 2026.
Of significance to the recruitment industry and errant umbrella company directors, the Chancellor confirmed that (paragraph 3.102) a new “Abusive Phoenixism Taskforce” will be established to disqualify rogue directors. Directors of umbrella companies sometimes use the Insolvency Act 1986 to avoid liability for tax debts. Expanding the scope of the existing law will provide further deterrence against forming a new company immediately after dissolving a company that faces tax liability. Those familiar with Schedule 13 to the Finance Act 2020 may well agree that it is insufficient to deter phoenixing.
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