What's the difference between inside and outside IR35?

Inside IR35 a contract is treated as employment for tax and you're usually paid through an umbrella on PAYE. Outside IR35 you can draw a small salary plus dividends through your own limited company, which is normally more tax-efficient.

How is inside-IR35 take-home worked out?

The contract rate first has to cover employer's National Insurance (15% above £5,000.00) and the umbrella's margin, leaving a gross salary that is then taxed through PAYE income tax and employee's National Insurance.

How is a day rate turned into an annual figure?

The calculator multiplies your day rate by the days worked per week and the weeks worked per year to get an annual contract value, then applies tax both inside and outside IR35.

IR35 Take-Home Calculator (2026/27)

Outside IR35 breakdown
Contract value (profit)	£115,000.00
Director's salary	£12,570.00
Employer's NIC	£1,135.50
Corporation Tax	£23,093.04
Dividends drawn	£78,201.46
Dividend tax	£18,478.27
Take-home	£72,293.19

How this is calculated

IR35 (the off-payroll rules) decides whether a contract is really employment for tax. This calculator turns your day rate into an annual contract value (day rate × days per week × weeks worked) and shows what you'd keep two ways: inside IR35, taxed like an employee, and outside IR35, drawing salary plus dividends through your own limited company.

Inside IR35 (via an umbrella)

Inside IR35 you're normally paid through an umbrella company on PAYE. The contract rate first has to cover the employer's costs — employer's National Insurance (15% above £5,000.00) and the umbrella's margin (assumed £25.00 per week here) — before a gross salary is left. That salary is then taxed through PAYE income tax and employee's National Insurance.

Outside IR35 (limited company)

Outside IR35 the contract income becomes company profit. We model a tax-efficient £12,570.00 director's salary, charge Corporation Tax on the remaining profit, then draw the rest as dividends taxed on your personal return — the same engine as our dividend-vs-salary calculator.

Assumptions

Illustration only, with no expenses, no pension and no other income. Real take-home depends on your costs and circumstances.
Inside IR35: an umbrella margin of £25.00/week and employer's NIC are deducted before PAYE. The Apprenticeship Levy (0.5%) is omitted for simplicity, so real inside-IR35 take-home is a little lower.
Outside IR35: a single-director company on a £12,570.00 salary, no Employment Allowance, Corporation Tax with Marginal Relief and no associated companies.
England, Wales & Northern Ireland rates (2026/27); Scotland's income-tax bands differ.

Rates used (2026/27)

Income tax: Personal Allowance £12,570.00; 20% / 40% / 45% bands.
National Insurance: employee 8% then 2%; employer 15%.
Dividend tax: £500.00 allowance, then 10.75% / 35.75% / 39.35%.
Corporation Tax: 19% to £50,000.00, 25% from £250,000.00, Marginal Relief between.

Determining your IR35 status

This tool does not decide your IR35 status — only your take-home under each outcome. Status depends on your working practices and contract; use HMRC's Check Employment Status for Tax (CEST) tool and take professional advice.

Sources

Based on published HMRC rates for 2026/27 — see gov.uk/income-tax-rates, employer rates & thresholds, gov.uk/tax-on-dividends and gov.uk/corporation-tax-rates.

This is an illustration for information only — not tax, accounting or financial advice. Check with an accountant before acting.

Information and estimates only — not tax or financial advice. Figures are based on published HMRC rates; check gov.uk or an accountant for your situation.