IR35 & Lorry Drivers: What You Need to Know

Today we’re getting into the nitty gritty of everyone’s favourite topic, taxes! It may not be a super exciting subject, but staying in the know is essential to being compliant and avoiding any fines.

IR35 first came into law in 2000, but it’s been getting more attention recently because of some big changes that came in over the last few years. Whether you’re a HGV driver or you’re employing them, it’s important to know where you stand.

If it all seems a bit confusing, don’t worry. We’ll explain what IR35 actually means, how it impacts your employment status, the changes that are coming in 2025, and most importantly, how to make sure you’re on the right side of the rules.

IR35 rules in a nutshell

The off payroll working rules, or IR35, is UK tax legislation that’s about checking if workers are genuinely self-employed or not. 

For example, if a freelancer has the same hours and duties as a full-time employee, IR35 may consider them a “disguised employee”, and HMRC may investigate whether they’re paying the correct amount of income tax.

Now, why should HGV drivers and employers care? Well, if you're an employer, IR35 means a bit more paperwork to make sure everything’s in line with the law. If you’re a HGV driver working through a Personal Service Company (PSC), IR35 could seriously affect your wages.

And the responsibility for staying compliant is moving away from the driver and onto the business hiring them. As of 2021, it was up to medium and large-sized companies to determine a driver’s IR35 status. (Small, private sector employers don’t need to worry about that.) There can be serious penalties for miscategorising an employee’s status, so, employers need to be extra careful.

What’s changing in 2025?

From April 2025, what counts as a ‘small business’ is changing. Here’s what the new definition says:

• Annual turnover: Not more than £15 million (up from £10.2 million)

• Balance sheet total: Not more than £7.5 million (previously £5.1 million)

• Number of employees: No more than 50 employees (which hasn’t changed)

This means that up to 14,000 companies that were previously classed as ‘medium’ now fall under the ‘small business’ category.

If your company is one of them, you won’t have the responsibility of deciding a worker’s IR35 status or making sure they pay the right amount of taxes.

What this means for HGV drivers

So, how does all this affect you as a HGV driver? Well, there are a few things you’ll need to keep in mind if you're trying to make sense of these off payroll rules.

• Inside IR35: If you’re considered “inside”, you’ll be treated like an employee for tax purposes. This means lower take-home pay, as income tax and National Insurance contributions will be withheld just like they would be for a regular job.

• Outside IR35: If you’re “outside”, payment can be made to your limited company (if you have one), and you get more flexibility as a self-employed contractor. You won’t have PAYE deductions, and you can claim more expenses, meaning you’ll likely have more take-home pay. But, with great freedom comes great responsibility, i.e., more admin and paperwork.

If you're a self-employed driver, the changes to the company size definition won’t affect you until at least April 2026. After that, you'll need to ensure you're IR35 compliant when working with small businesses. 

Note: As a contractor, you can ask for confirmation of the size of a client’s business. They’ve got 45 days to get back to you, and the deadline is whichever comes later:

• 45 days from getting the request, or

• 45 days before the start of the relevant tax year.

For example, if you ask on February 20, 2025, you should get a response by April 6, 2025 (when the new tax year starts).

If the client doesn’t reply in 45 days, you can take legal action to get them to share this information.

With IR35 making compliance trickier, a lot of companies are playing it safe by using PAYE or even moving drivers into permanent employment, instead of offering self-employed contracts.

What this means for employers

It’s not just drivers that need to be mindful of IR35. Employers are under extra pressure to stay compliant and keep clear of penalties under the new rules. If you’re hiring truck drivers, here’s what you need to keep in mind:

More red tape

Employers now have to issue Status Determination Statements (SDS) for every contractor to show they’ve properly assessed their IR35 status. 

Check Employment Status for Tax (CEST) is a tool set up by the government, assessing a few different factors to help employers figure out their workers' employment status under IR35. It’s a useful starting point, but it’s always good to double-check the results with expert advice if you’re unsure.

How IR35 status is determined

Here are the 3 main things HMRC looks at to figure out whether someone is classed as “inside” or “outside” these rules:

1. Supervision, direction, and control: How much control does your end client have over what you do, how you do it, when, and where you get the job done?

2. Substitution: Do you have to do the work yourself, or can you send someone else to do it for you?

3. Mutuality of obligation: Is your client obliged to give you work, and are you obliged to take it?

Potentially higher costs

If you hire a driver who falls inside IR35, you’ll be responsible for paying extra tax and National Insurance contributions, just like you would for an employee. 

And if you don’t take “reasonable care” when assessing a contractor’s IR35 status, you could be liable for unpaid taxes and other penalties. Those costs can add up fast!

A change in hiring practices

With all the new rules associated with IR35, a lot of businesses are moving toward PAYE or umbrella companies to stay compliant and avoid the risk of penalties. These are becoming the easiest ways to hire self-employed drivers, as they simplify the payroll and tax process and ensure everything’s done above board.

How to stay on the right track

Okay, now that you’ve got an idea what IR35 is, let’s get into how to stay compliant whether you’re an employer or a driver.

For employers:

• Write clear contracts that spell out the job details, so there’s no room for confusion.

• Use HMRC’s CEST tool to check your workers' IR35 status. 

• Get some expert tax advice to avoid any expensive slip-ups.

For HGV drivers:

• Check your contracts to make sure you know exactly where you stand with IR35.

• Think about working for umbrella companies if you want more flexibility and to stay compliant with the rules.

• If you're working with someone now classified as a ‘small business’, get ready to handle the IR35 paperwork on your own.

• Get professional tax advice to make sure you’re keeping as much of your hard-earned cash as possible.

Still have questions? We can help!

It can be a bit of a minefield figuring out where you stand as a self-employed driver or staying compliant as an employer. Hopefully, we’ve cleared up some confusion and made things a little easier to understand.

Whether you’re looking for drivers, or you’re a driver looking for work, we can make it happen. If you’ve got questions, or just want to have a chat, get in touch with our team!