The changes take effect today (30 April 2025) and mark the first substantial overhaul since the tool’s introduction in 2017.
CEST helps employers and workers confirm whether a freelancer or contractor should be classed as employed or self-employed for tax purposes – this is also known as a worker’s IR35 status.
IR35 tax rules apply to workers, freelancers and contractors who provide their services through their own limited company or another type of intermediary to a client, but who would otherwise be an ‘employee’ if the intermediary was not used.
Self-employed contractors typically work under this kind of arrangement, which can reduce the tax they pay.
Announced in the Spring Budget, CEST 2.0 introduces several improvements aimed at addressing long-standing criticisms.
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The policy update stated: “HMRC is revising its Check Employment Status for Tax (CEST) digital tool with effect from 30 April 2025. These changes will make it easier for CEST’s users to use the tool.
To support these changes, HMRC will also publish revised guidance that offers help on how to answer the revised questions. HMRC is committed to standing behind the outcomes of this tool where it has been used correctly.”
‘In its current form, it’s a blunt instrument’
Seb Maley, QDOS’ CEO, said: “The Government is right — the CEST tool needs revising. In its current form, it’s a blunt instrument for determining if an individual is genuinely self-employed or should be paying employment taxes.
“Employment status can be a minefield and no stone should be left unturned when determining it. The sheer cost of getting things wrong from a tax perspective can be staggering.”
