What do contract IT workers need Budget 2026 to announce?

As higher hiring costs, IR35, late payments and limited tech training tax breaks squeeze the contract IT space, veteran recruiter Matt Collingwood lays out four Budget 2026 asks that could revive the UK technology jobs market.

These four things are what contract IT workers and tech freelancers – the type of workers my four recruitment businesses place across the UK – need chancellor John Healey to say on October 28th 2026, in the first Budget of the Andy Burnham-led Labour government. Watching the chancellor of the day’s Budget on TV in our boardroom has become rather like bingeing a box-set series. An episode nobody wants to miss, even if the excitement of earlier years has been replaced by uncertainty, trepidation and, sometimes, disappointment and concern. So viewer discretion: this quartet doesn’t include spoilers; it’s much more the Healey House of Commons Autumn Budget production I want to see, writes Matt Collingwood, managing director of VIQU IT, a UK IT recruitment agency with offices in Birmingham and Southampton. 

The four desirable announcements for tech freelancers at Budget 2026 are:

1. Offer enhanced tax relief for professional retraining

What HMRC deems allowable as a tax-deductible expense is long overdue for an upgrade, notably for those seeking AI and other new skills as a sidestep to their IT skills.

2. Guarantee payment within 30 days

It's 60 days under the late payments bill making its way through parliament, but Healey should halve that to 30 days to be fairer for freelancers in tech and other key sectors.

3. Create a Freelancer-to-Apprentice scheme

Two new freelance champions show that Burnham’s government is ‘freelancer-friendly,’ but it should appoint IT security freelancers, among other techies, as tutors to youngsters.

4. Reform IR35 through certainty, not abolition

 A hard off-payroll rules reset could cause chaos, but a review to clarify IR35 is needed and would pay dividends to end-hirers and freelancers if it brought more certainty.

How much has employer NIC risen under Labour?

The UK government has recently faced difficult economic decisions, and financially, it has leant on employer NIC to raise revenue. Budget 2024 increased employer National Insurance from 13.8% to 15% and reduced the threshold at which employers begin paying it from £9100 to £5000. Budget 2025 then extended the freeze on income tax and National Insurance thresholds until 2031.
Alongside this rise in the cost of hiring, the UK unemployment rate has risen — from 4.4% in October 2024 to 4.9% in April to June 2026, while the number of payrolled employees fell by 86,000 year-on-year.

How is higher employer National Insurance changing IT hiring patterns?

Across our technology staffing business, we have noticed a trend in 2026 towards some tech employers favouring fixed-term contracts over taking on permanent employees. 

Employers are budgeting for the shorter term because of the increased NIC rate and the lower threshold at which NI kicks in. Hirers are also opting for fixed-term contracts to reduce their risk, as many are worried about what measures could be announced on October 28th.

This uncertainty breeds caution, and it’s all a far cry from before Covid, when the tech recruitment market (both contract and perm) felt relatively stable and predictable. 

Here are the four measures tech freelancers want to hear — and the ones that would help return some buoyancy to the contract IT hiring market.

1. Offer enhanced tax relief for professional retraining

Skills in IT can become outdated extremely quickly, yet tech contractors/freelancers must usually finance their own retraining and absorb the loss of income while completing it. 

What training costs can IT freelancers currently claim tax relief on?

HMRC currently allows self-employed people to claim qualifying training expenditure where it updates or develops skills connected with their existing business. However, courses principally intended to establish an unrelated new trade might not qualify.

Which tech skills should a new training tax relief support?

Autumn Budget 2026 should introduce tax relief for accredited training in areas of national shortage in tech, notably: 

• AI 

• data 

• cloud computing 

• cybersecurity

• green technology. 

This new training tax relief for new skills would ideally cover both sole traders and Personal Service Company (PSC) contractors. The new ‘tech freelancer-friendly’ tax relief should expressly include reskilling into an adjacent profession. 

Bottom Line: A more generous tax-deductible training regime for the UK’s freelance technologists could help ease IT skills shortages, especially as tech contractors often want (and need) to reskill into adjacent trades.

2. Guarantee payment within 30 days

For a freelancer or contractor supplying IT services or products, a single unpaid invoice can mean being unable to pay a mortgage, tax bill or even any sub-contractor that they’ve ambitiously taken on. 

How much do late payments cost the UK economy?

Government-backed research estimates that late payments cost the UK economy almost £11billion annually. Approximately 1.5million businesses are affected each year, £26bn is outstanding at any given time, and 14,000 businesses close annually because of late payments. 

What payment terms should Budget 2026 introduce for freelancers?

Budget 2026 should guarantee that freelancers and microbusinesses are paid within 30 days. The House of Lords in August 2026 turned down that 30-day deadline on private sector contracts, preferring that the UK’s Commercial Payments Bill instead contains a 60-day maximum statutory payment term.

Not only should chancellor Healey halve that maximum term, but he should go further for freelancers and say that statutory interest and compensation should be added automatically, compared with today’s situation where a supplier potentially has to challenge an important client to receive the full amount UK legislation entitles them to.

In the public sector, I’d like to see persistent late payers lose eligibility for government contracts, in the IT and technology space, but also across the wider procurement spectrum.

Bottom line: Freelancers in IT still say getting paid is one of their biggest headaches and growth limitations, so an intervention at Budget 2026 could make all the difference to cash flow and expansion.

3. Create a Freelancer-to-Apprentice scheme

The government should use Budget 2026 to establish a scheme that pays experienced freelancers and contractors to train young people in practical, commercially valuable skills. 

Has Andy Burnham’s government shown support for freelancers?

Since Andy Burnham became PM on July 20th 2026, his government has shown that it values freelancers — by appointing two new freelancer ‘champions’ on September 1st 2026. The champions will advocate for the 703,000 self-employed people working in the UK’s creative industry, which officially includes IT, Software & Computer Services.

How would a Freelancer-to-Apprentice scheme work?

Under a modern version of the traditional master-and-apprentice model, an IT freelancer, for example, could mentor a young person in cybersecurity, software development, or data analysis.

The freelance contractor’s PSC would receive sizable funding towards the young person’s wages, training and supervision, without having to become a large apprenticeship provider. 

How many young people in the UK are NEET?

Between April and June 2026, approximately 981,000 people aged 16 to 24 were not in education, employment or training, representing 13% of that age group. Of these 981,000, 393,000 were unemployed and actively looking for work.

A freelancer-to-apprentice scheme could offer a £5,000 training grant and 12 months of wage support. Recruitment agencies could bring together groups of freelancers, employers and training providers, providing thousands of young people with genuine workplace experience that could help towards solving the UK’s tech skills shortages further down the line. 

Which tech skills are in the shortest supply?

IT skills shortages are currently significant. A total of 29 technology skills are in “short supply” according to Report on Jobs, published by the Recruitment & Employment Confederation (REC) on September 7th 2026. Seven of those 29 technology skills were scarce on both a contract and permanent basis:

1. Cyber Security

2. Full-Stack Development

3. IT

4. Software 

5. Software Development 

6. Technical Roles

7.  Technology

Bottom line: Pairing young NEETs — 16-to-24-year-olds not in education, employment or training — with experienced IT freelancers in a Freelancer-to-Apprentice scheme could plug the UK’s tech skills deficit while boosting these young people’s employability.

4. Reform IR35 through certainty, not abolition

If Labour will not repeal the off-payroll rules — and there's every chance it won’t, given that the party introduced IR35 in 2000 — it should at least make the rules workable and clear.

How should HMRC really treat IR35 status determinations?

Where an employer has used an independently audited assessment, considered the actual working practices and issued a proper status determination statement, HMRC should honour that decision unless the information supplied was deliberately inaccurate. 

How should contractors’ IR35-appeal rights be bolstered?

Ideally, chancellor Healey will announce at Budget 2026 that contractors should receive a statutory right to an independent appeal if they disagree with the IR35 status decision, with such decisions to be completed within 30 days. 

Currently, the IR35 status appeals process takes 45 days and is client-led.

What would — and wouldn't — this IR35 reform change?

My budgetary package of IR35 reform would not remove IR35 or excuse ‘disguised employment,’ as HMRC calls it. Rather, these desirable changes to IR35 would reduce the uncertainty that leads a significant number of risk-averse organisations in 2026/27 to impose blanket ‘inside IR35’ decisions or refuse to engage PSC contractors altogether.

For the recruitment industry, including in tech, this type of IR35 reform could unlock projects, increase labour mobility and allow UK organisations to access specialist skills when they need them most. 

Bottom line: The off-payroll working rules have led to numerous unintended consequences, but chief among them is the default inside IR35 or knee-jerk blanket ban on limited company freelancers, often for fear of HMRC ramifications. The shutdown of roles for bonafide, genuinely self-employed contractors is detrimental to recruiters, businesses, contractors and the UK economy.

Are you an IT worker waiting for the next ‘episode’ of ‘The Budget’?

Successive governments have asked IT and tech freelancers and their Personal Service Companies to absorb considerable additional costs, and the NI threshold freeze until 2031 means more of that cost will land on employers each time pay rises.

The freeze on income tax, also vowed until 2031 under Rachel Reeves as chancellor, raises questions about whether enough consideration was given to the businesses and entrepreneurs who are expected to create employment and economic growth.

How has the labour market responded to rising NIC?

Since the announcement of the employer NIC changes at Autumn Budget 2024, the UK has seen a more cautious labour market, including in IT/Technology. 

Although the National Insurance reforms effective from April 6th 2025 cannot be blamed in isolation, the logic is compelling — when employment becomes more expensive, businesses have less money available for recruitment and are more likely to reduce headcount.

The ONS does not produce forecasts, but the Bank of England expects unemployment to reach 5.1% by the end of 2026. 

That 5.1% figure will likely be on John Healey's lips when he delivers the Autumn Budget. It may also be the moment we see whether Andy Burnham’s criticism of his own party’s employer NIC changes — voiced before he became PM — materialises into anything substantive.

What does a cautious labour market mean for tech staff hiring?

As a frontline recruitment business in IT, where I've specialised for almost three decades, I can say without any shadow of a doubt: when businesses are cautious, hiring slows. That means headcount — temporary and full-time — is harder to justify, and every party in the labour market suffers.

Before Covid, the technology labour market felt relatively stable and predictable. The past six years, however, have brought repeated cycles of boom and bust, with rather more of the latter recently. 

What have contract IT workers had to face?

Freelancers with IT skills have had a tough time of it, having to navigate and endure:

• a pandemic 

• inflation

• rising interest rates 

• skills shortages 

• political uncertainty 

• a growing employment cost base

Is there room for optimism at Budget 2026?

Despite all six of those — plus IR35, late payments and limited tax-deductible training on top (three problems my budgetary asks would remedy) — I am cautiously hopeful.

Businesses and contractors do not expect every Budget to deliver giveaways, but they do need clarity, consistency and an environment that rewards investment and enterprise. After six turbulent years, even a modest helping hand to contract workers in IT and other key industries would be welcome.

Bottom line: Highly skilled, self-employed, contract and temporary professionals provide businesses with flexibility, expertise and access to talent that may not be available within their permanent workforce. Any measures at Budget 2026 that make engaging individuals from this talent pool more expensive or complicated risk reducing investment, limiting mobility and slowing growth.

Chancellor Healey — this Autumn Budget does not have to be all ‘doom and gloom.’ If Labour genuinely wants to become the party that champions business growth and the independent workforce, October 28th is the episode that could finally deliver for tech freelancers.