Outside IR35 Shortage Tops Contractor Fears for 2026

A survey of more than 600 independent professionals found that scarce outside IR35 work had become the biggest perceived threat to contractor businesses, narrowly ahead of the wider shortage of assignments.

The availability of genuinely independent engagements, rather than artificial intelligence or illness, emerged as the leading concern for UK contractors at the start of 2026.

Research released by tax and insurance specialist Qdos found that 25 per cent of respondents regarded the lack of outside IR35 contracts as the single biggest threat to their businesses. A further 24 per cent selected the difficulty of finding new work, while 22 per cent cited tax rises and 9 per cent chose cost of living pressures.

Only 6 per cent saw being unable to work through illness as the principal danger, and 4 per cent selected artificial intelligence and automation. For IT contractors, whose market has experienced both reduced technology hiring and cautious employment status policies, the ranking showed that tax treatment and access to work were more immediate concerns than technological displacement.

Client caution remains the central problem

The off payroll rules moved responsibility for status decisions from contractors to medium and large private sector clients in April 2021, following the public sector reform in 2017. A hiring organisation must decide whether the individual would be an employee for tax purposes if the personal service company were removed from the arrangement.

In principle, this requires an individual assessment based on the contract and the working relationship. In practice, some organisations stopped engaging personal service companies or required contractors to use payroll and umbrella arrangements. That transferred risk away from the client, but also reduced the number of roles in which independent specialists could trade through their own businesses.

Qdos chief executive Seb Maley said the concern arose from contractors being put “on the payroll without a fair assessment of their employment status”.

The survey also found that 54 per cent wanted the government to reverse the off payroll reforms. That political demand appeared unlikely to produce an immediate policy change, but it illustrated how strongly contractors connected the rules with reduced choice in the market.

Earlier data showed confidence weakening

The Qdos findings were consistent with research published by the Association of Independent Professionals and the Self Employed during 2025. That report found that 67 per cent of contractors felt less confident about securing outside IR35 roles. The share of engagements assessed as outside IR35 had fallen to 70 per cent, compared with 80 per cent in both 2023 and 2024.

Among respondents who were not working, 56 per cent attributed their position to the effect of IR35 on client hiring decisions. Those figures did not prove that every rejected or payroll based role had been incorrectly assessed, but they demonstrated a broad loss of confidence in the market’s ability to distinguish genuine suppliers from disguised employees.

The picture was not wholly pessimistic. Qdos reported that 75.12 per cent described their 2025 business performance as consistent or successful, more than 40 per cent earned day rates between £500 and £749, and 18 per cent earned higher rates. More than half remained fairly or very confident about 2026, while 70.27 per cent intended to stay self employed over the medium to long term.

What the findings meant for IT contractors

For technology specialists, the strongest defence against a restricted market remained evidence that the engagement was a business to business project. Clear deliverables, genuine control over how services were supplied, financial risk and working practices consistent with the written contract all mattered.

Contractors also needed to test the client’s process before accepting a role. A headline claiming an assignment was outside IR35 was not enough if the working practices resembled employment. Equally, an automatic inside IR35 label should not be mistaken for a reasoned status decision.

The January survey showed that contractors remained committed to independent work, but believed client behaviour was making that model harder to sustain. The largest threat was not the wording of IR35 alone. It was the shrinking opportunity to obtain a fair assessment and trade on genuinely independent terms.