With one month to go until Autumn Budget 2026, top contractor advisers have made ten predictions about what John Healey will announce for contractors — exclusively to ContractorUK.
Speaking on September 28th, ahead of the chancellor’s October 28th Budget, the advisers said the ten tax, financial and status measures that they expect for contractors are:
- Nothing to rewrite IR35: Labour won’t be pressurised by the Conservatives’ pledge to replace IR35 (SG Accounting)
- Off-Payroll Working (OPW) rules tweaks: Status Determination Statement scrutiny (Bright Ideas Accountancy)
- Tax-free dividend allowance withdrawn: costing higher-rate Personal Service Company shareholders £179 (DNS Accountants)
- Tech/AI-led HMRC package: the opposite of the ‘halt MTD’ call by the Tories (Caroola Accountancy)
- Small business-unfriendly revenue raiser: to fund a potentially higher tax-free personal allowance (Beansprout Consultancy)
- Employment Status Review: at least an update on the review, given it was promised before 2026 (Markel Tax)
- A more joined-up HMRC: with less of Companies House acting in isolation (Bright Ideas Accountancy)
- Stealth tax increase on company directors: an income tax hike on directors in all but name (Bright Ideas Accountancy’s founder Michael McCullion)
- Capital Gains Tax increase: either through a lower allowance or higher headline rate (DNS Accountants)
- New HMRC levy on earnings: targeting income between the higher rate (£50,270) and additional rate (£125,140) (DNS Accountants founder Sumit Agarwal).
Editor’s Note: Last month, the FCSA shared with ContractorUK its five asks of Autumn Budget 2026 for the contractor sector.
1. Nothing to rewrite IR35
“I don’t expect Budget 2026 to contain a dramatic IR35 announcement or a wholesale rewrite of the rules,” says SG Accounting boss Dan Mepham, whose prediction implies Labour won’t match the Tories’ pledge to replace IR35, a month after advisers (including him) said they want Healey to reset the off-payroll working rules.
A chartered certified accountant, and contractor tax specialist since 2006, Mepham continued yesterday to ContractorUK: “My prediction for contractors at Autumn Budget 2026 is that we’ll continue to see measures aimed at narrowing the gap between employment and self-employment from a tax and compliance perspective.
“The 2027 umbrella company regulation already indicates the direction of travel. With public finances under pressure, the new Andy Burnham-led Labour government is likely to focus on protecting tax revenues and tightening compliance across the labour supply chain. For contractors, that probably means more incremental changes rather than one headline-grabbing reform.”
2. Off-Payroll Working (OPW) rules tweaks
“Tweaks aimed at making the existing IR35 regime work better, potentially around Status Determination Statements, HMRC liability, or reducing some of the administrative friction, are more likely…[than] the big IR35 reset many contractors would like,” says Michael McCullion, founder of Bright Ideas Accountancy.
An AAT and ACCA-qualified accountant, McCullion added to ContractorUK: “I’d be surprised if the government unwound the off-payroll rules altogether. [But equally] the government will want to be seen as backing flexible working, albeit without opening up what it would regard as a sizeable tax gap.”
3. Tax-free dividend allowance withdrawn
“My Autumn Budget prediction is that the dividend allowance, which has been reduced to £500 from £5,000 originally, will be axed altogether on October 28th,” says DNS Accountants’ Sumit Agarwal.
“I hope I’m wrong about personal service companies (PSCs) losing their tax-free dividend allowance, but just look at what successive governments have done to the once-flourishing PSC market.”
Asked to tot up the potential impact of losing the £500 dividend allowance, Agarwal, who is ACA and ACMA-certified, told ContractorUK: “For PSC contractors, a withdrawal of the dividend allowance at the 35.75% tax rate would mean paying HMRC an additional £179.00 in tax — an appropriate sum for a government seemingly living by Tesco’s slogan ‘Every Little Helps.’”
4. Tech/AI-led HMRC package
“My expectation of Budget 2026 is that the government will use it to continue its push towards greater HMRC digitalisation, automation, AI usage, and more real-time tax collection,” says Caroola Accountancy operations director Carl Bridges.
Fresh from demystifying HMRC’s mass recalculation of tax bills for contractors, Bridges, an account reconciliation expert specialising in contractor tax since 2011, explained last night to ContractorUK:
“Recent government consultations around Direct Debit, collection of VAT, and PAYE liabilities, together with wider tax simplification and modernisation initiatives, suggest HMRC’s focus remains on improving compliance through earlier intervention and technology.”
5. Small business-unfriendly revenue raiser
“I fear that what small business owners can firmly expect from next month’s Budget is probably not a lot of help,” warns Helen Christopher, managing director of Beansprout Consultancy.
Speaking amid reports that No 11 is weighing Ecotricity owner Dale Vince’s proposal to raise the personal allowance from £12,570 to £15,570, chartered accountant Ms Christopher told ContractorUK: “The money has to come from somewhere.
“And while we don’t yet know the detail, some form of tax rise or increased cost for small enterprises feels inevitable… [meaning that] owner-managers will continue to need to adapt, protect cash, improve productivity and increase profitability.”
A financial planning and growth strategist with 30 years’ experience, including as a regional director of SJD Accountancy, Christopher urged: “Whatever the chancellor announces…my advice is don’t wait for the Budget or get distracted …[instead] plan, focus on what you can control — and take action now to build a stronger, more profitable business.”
6. Employment Status Review
“I don’t expect the government to make any announcements on October 28th 2026 that specifically affect our team’s area of expertise…[on] IR35”, says Markel Tax senior consultant Danny Batey.
A former HMRC compliance officer, Batey caveated to ContractorUK: “But on the wider issue of employment status, the Labour government had promised when it came into power in July 2024 that it would open a consultation on employment status. However, nothing has happened [despite a pledge in August 2025 to publish the review before the end of 2025]. So there may be a very small chance that this gets a mention — an update at least — in Budget 2026 documents that follow the chancellor’s House of Commons speech.”
Editor’s Note: ContractorUK understands that the employment status review has been drafted, and was all but ready for publication on the eve of Andy Burnham’s appointment as PM.
7. A more joined-up HMRC
“I think HMRC compliance will be one of the quieter [but still significant] revenue-raising measures in the 2026 Budget,” predicts Bright Ideas Accountancy boss Michael McCullion.
A contractor taxation adviser since 2014, McCullion said: “More investment in data matching, digital compliance and targeted enquiries gives the Treasury a way of raising revenue without announcing another headline tax increase. Contractors, PSCs and owner-managed companies should expect HMRC to become increasingly good at joining the dots — particularly between it and Companies House, in relation to payroll, VAT and Self-Assessment”.
8. Stealth tax increase on company directors
“I’d expect to see in this autumn’s budget another attempt by the government to narrow the tax advantages of extracting profits outside salary, rather than a straightforward income tax increase”, predicts Bright Ideas Accountancy MD Mr McCullion.
Formerly a Moffat & Co accountant, McCullion added: “With dividend income already having been targeted, contractors should be watching closely on October 28th for further changes affecting owner-managed companies — and their shareholders.”
9. Capital Gains Tax increase
“The new chancellor singling out the UK for having what he claimed is the ‘lowest CGT rate in the G7’ doesn’t bode well for Budget 2026,” says DNS Accountants’ Sumit Agarwal, citing John Healey’s interview with The Sunday Times on September 27th.
CIMA-certified, Mr Agarwal elaborated: “Healey doesn’t have much fiscal leg room, what with bond market pressure, soon-to-rise interest costs, and high fuel and energy costs. As a result, the capital gains headline rate could unfortunately be stretched to over 30%, and the tax-free CGT annual allowance, of £3,000 for 2026-27, further reduced.”
10. New HMRC levy on earnings
“Because things are financially tight for the UK and only a significant tightening of expenditure can change that, I’m bracing myself for Budget 2026 containing a special levy of 2% on earnings above £75,000,” says DNS Accountants’ founder-director Mr Agarwal.
A practising accountant since 2004, Agarwal explained his calculation: “This new HMRC levy would bridge the gap between higher rate taxation, which kicks in at £50,270, and additional rate taxation, which doesn’t kick in until £125,140. We’ve got very few options, so running a tighter ship is key. But it wouldn’t surprise me if many contractors, who’ve largely been dragged into umbrella companies from successive governments’ policy killing limited companies, react to any 2% levy by going off to Europe. Or just working from a low-tax country and seeking residence elsewhere. Another prediction I hope that I’ve got wrong.”
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