IR35 calculator: inside vs outside take-home pay 2026/27
Working through an umbrella or your own limited company changes what a day rate is worth. This calculator takes your day rate and working days and compares your take-home pay inside IR35 (deemed employment through PAYE) against outside IR35 (salary plus dividends from your own company).
Compare inside vs outside IR35 →Inside IR35: deemed employment
When a contract is inside IR35, the fee payer (usually the agency or umbrella company) must operate PAYE as if you were an employee. Crucially, the employer's National Insurance — 15% on earnings above £5,000 — is funded out of your assignment rate, so your deemed gross pay is lower than the headline day rate before Income Tax and employee NI are even applied.
What remains is taxed like a salary: nothing on the £12,570 Personal Allowance, then 20%, 40% and 45% Income Tax, plus employee National Insurance at 8% up to the higher-rate threshold and 2% above it.
Outside IR35: salary plus dividends
When a contract is outside IR35, your limited company invoices for the full contract value. A typical setup pays a small director's salary (often the £12,570 Personal Allowance), deducts employer NI on that salary and allowable business expenses, then pays Corporation Tax on the remaining profit — 19% up to £50,000, tapering to 25% at £250,000 with marginal relief.
The post-tax profit is drawn as dividends, which attract no National Insurance and are taxed at lower rates than salary: 8.8% basic, 33.8% higher and 39.4% additional, with the first £500 tax-free. Our dividend tax calculator breaks down the dividend bands in detail.
Inside vs outside IR35 at common day rates (2026/27)
Take-home pay at common day rates, assuming 220 working days a year, £2,500 of annual business expenses and a £12,570 director's salary outside IR35:
| Day rate | Contract value | Inside IR35 take-home | Outside IR35 take-home | Outside advantage |
|---|---|---|---|---|
| £300 | £66,000 | £44,223 | £48,760 | £4,537 |
| £400 | £88,000 | £55,318 | £59,483 | £4,164 |
| £500 | £110,000 | £66,414 | £70,195 | £3,781 |
| £600 | £132,000 | £74,423 | £80,587 | £6,164 |
| £750 | £165,000 | £88,176 | £91,290 | £3,114 |
The outside-IR35 advantage grows with the day rate because dividends avoid National Insurance entirely and Corporation Tax undercuts the combined employee and employer NI wedge. The interactive calculator lets you change the day rate, working days, expenses and salary — including Scottish income tax rates.
Comparing contracts fairly
An inside-IR35 day rate is not directly comparable to an outside-IR35 one: the same headline rate leaves you noticeably less inside IR35 because the employer NI comes out of your rate. When weighing up two offers, run both through the calculator on take-home pay — or convert the outside rate to an equivalent salary with the salary comparison calculator.
If you sometimes work as a sole trader rather than through a company, the self-employed tax calculator shows the Income Tax and Class 4 NI position on trading profits.
Frequently asked questions
What is the difference between inside and outside IR35?
Inside IR35 means your contract is treated as deemed employment: the fee payer deducts Income Tax and National Insurance through PAYE before you are paid, and employer National Insurance comes out of your contract rate. Outside IR35 means you operate a genuine business: your limited company invoices for the work, pays Corporation Tax on its profits, and you pay yourself a mix of salary and dividends — usually leaving a higher take-home.
How much more do I take home outside IR35?
It depends on your day rate, working days and expenses. At a £400 day rate over 220 days with £2,500 of expenses, outside IR35 leaves roughly £4,164 more per year in 2026/27 — the saving comes from dividends attracting no National Insurance and expenses reducing Corporation Tax.
Why is employer National Insurance deducted inside IR35?
When a contract is inside IR35, the deemed employer is liable for employer Class 1 NICs — 15% on earnings above £5,000. In practice that cost is funded out of your assignment rate, so your deemed gross pay is lower than the headline day rate before Income Tax and employee NI are applied.
Does the calculator include umbrella company fees or the Apprenticeship Levy?
No. The inside-IR35 figure shows the statutory deductions only — employer NI, Income Tax and employee NI. Umbrella companies also charge a weekly or monthly margin and may deduct the 0.5% Apprenticeship Levy, which would lower the inside-IR35 take-home further.
Who decides whether my contract is inside or outside IR35?
For medium and large private-sector clients (and all public-sector clients), the client must issue a Status Determination Statement. For small private-sector clients, you assess your own status. HMRC's CEST tool looks at substitution, control and mutuality of obligation, but many contractors get specialist advice or status insurance.
Is it worth setting up a limited company for one contract?
Often yes for longer or higher-rate contracts, because the outside-IR35 take-home advantage is typically several thousand pounds a year. Weigh it against accountancy fees, the cost of running the company, and the risk that a future contract is determined inside IR35.