IR35 Calculator — Inside vs Outside vs Umbrella 2025/26
See exactly what you take home under each arrangement — side by side.
Enter your day rate or annual contract value. We calculate your take home pay outside IR35 through a limited company, inside IR35 as a deemed employee, and through an umbrella company — all in one comparison using 2025/26 HMRC rates.
✓ Three-way comparison ✓ 2025/26 & 2026/27 rates ✓ Corp tax + dividends ✓ Employer NI at 15%
Take home pay comparison —
Monthly take home
Figures are estimates for using published HMRC rates. Outside IR35 assumes a single-director Ltd with no Employment Allowance, optimal salary/dividend split, and no other income. Inside IR35 applies the deemed employment calculation — employer NI is deducted from the assignment rate before income tax. Consult a qualified contractor accountant for personalised advice. HMRC CEST tool can help determine IR35 status.
What is IR35 and why does it matter for your take home pay?
IR35 — officially known as the off-payroll working rules — is tax legislation that determines whether a contractor is genuinely self-employed or working like an employee through a limited company. If HMRC decides your engagement is inside IR35, your income is taxed broadly like employment income. If you are outside IR35, you can extract money from your company tax-efficiently using a salary and dividend combination.
The difference in take home pay between inside and outside IR35 is significant. <cite index=”48-1″>At a £500 day rate working 220 days per year, inside IR35 costs approximately £15,000–£17,000 per year compared to outside IR35 through a limited company.</cite> That is a real, annual reduction to your income — not a technical accounting point.
This calculator shows the exact figure for your day rate, across all three contractor arrangements, using the correct 2025/26 rates including the increased employer NI of 15%.
The three contractor arrangements — what each one means
Outside IR35 — limited company Your limited company is paid gross by the client. You pay corporation tax on company profits, then extract the remainder as a combination of salary and dividends. Dividends are taxed at lower rates than employment income — 8.75% at basic rate in 2025/26 — which is the primary source of the take home advantage. You decide how much to pay yourself and when. You bear the administrative cost of running a company (accounting fees, Companies House filings) and must maintain robust evidence of outside IR35 status.
Inside IR35 — deemed employment The end client or agency deducts income tax and National Insurance from your assignment rate before paying you. Your income is taxed like an employee’s. The 15% employer NI is deducted from your rate before you see any pay — reducing the pool of money available to you. You do not benefit from the dividend tax advantage. For medium and large private sector clients, and all public sector clients, the client determines your IR35 status and issues a Status Determination Statement.
Inside IR35 — umbrella company The umbrella company employs you and handles all PAYE on your behalf. The model is similar to deemed employment but with an additional weekly fee (typically £15–£35) for the umbrella’s administration. The advantage is simplicity — no company to maintain, employment rights including sick pay and holiday entitlement, and the umbrella carries the compliance risk. The take home is slightly lower than direct deemed employment by the umbrella fee.
How the IR35 calculator works
Day rate or annual contract value Enter either your agreed day rate with the client, or the total annual contract value if you know it. The calculator converts day rate × days worked per year to an annual gross contract figure. The standard UK contractor year is 220 days — adjust this in the inputs if your contract is different.
Outside IR35 calculation The calculator takes your gross contract value, deducts allowable expenses and director salary, calculates employer NI on the salary, then applies corporation tax to the remaining company profit. Post-tax profit is extracted as dividends. Dividend tax is calculated based on where the dividends fall in your income tax bands. The default director salary is £12,570 — the personal allowance. This avoids income tax on the salary while using your full personal allowance. Note that employer NI now starts at £5,000 (reduced from £9,100 in April 2025), so a single-director Ltd company pays 15% employer NI on salary above £5,000. Single-director companies cannot claim the Employment Allowance.
Inside IR35 calculation The 15% employer NI is deducted from your gross assignment rate first. The remaining amount is your deemed salary. Income tax and employee NI are then calculated on the deemed salary, exactly as for an employed worker.
Umbrella calculation The same as inside IR35, with the umbrella’s annual fee (weekly fee × 52) also deducted from the assignment rate before calculating your gross pay.
The three IR35 status tests
HMRC uses three primary tests to determine whether a contractor is inside or outside IR35. These come from case law and are applied to the actual working relationship — not just what the contract says.
Control Does the client control how, when, where, and what work is done? A contractor who is directed day-to-day by a manager, works set hours, and has no say in how tasks are completed looks like an employee. A contractor who defines their own working methods, sets their own schedule, and delivers an agreed outcome is more likely to be outside IR35.
Substitution Can you send a qualified substitute in your place without the client’s approval? A genuine, unfettered right of substitution is one of the strongest indicators of outside IR35 status. If the client would reject a substitute — because they specifically want you — that points toward inside IR35.
Mutuality of obligation Is there an ongoing obligation to offer and accept work? Employees expect continuous work and are obliged to accept it. A genuine contractor takes on specific projects with defined outcomes and has no expectation of follow-on work. Short, project-based contracts with clear deliverables support outside IR35 status.
HMRC’s CEST tool can help you assess your status, though it is not definitive. The actual working relationship always takes precedence over what a contract states.
Who determines IR35 status?
Since April 2021, responsibility for determining IR35 status shifted from contractors to end clients for medium and large private sector engagements. For all public sector engagements, the same rules have applied since April 2017.
<cite index=”68-1″>From 6 April 2025, small company thresholds increased — annual turnover up to £15 million, balance sheet total up to £7.5 million, with 50 or fewer employees.</cite> Companies that previously fell under the off-payroll rules may now be reclassified as small, passing IR35 determination responsibility back to the contractor from April 2026 onwards.
If your client is medium or large, they must issue a Status Determination Statement (SDS) with their IR35 decision and the reasons for it. You have the right to dispute the determination through the client’s disagreement process.
If your client is small (under the relevant thresholds), you determine your own IR35 status as the contractor.
What changed in April 2025
Two significant changes took effect in April 2025 that directly affect contractor take home pay.
Employer NI increased to 15% <cite index=”62-1″>The employer NI rate increased from 13.8% to 15% from 6 April 2025, and the secondary threshold — the point at which employer NI starts — dropped from £9,100 to £5,000.</cite> For contractors inside IR35, this means more of your assignment rate is consumed by employer NI before you see any pay. The calculator applies the correct 15% rate on income above £5,000.
PAYE set-off mechanism introduced <cite index=”62-1″>From April 2025, HMRC takes into account the tax already paid by the contractor when calculating any liabilities</cite> in cases where a client wrongly classified an engagement as outside IR35. This reduces the risk of double taxation for businesses engaging contractors.
IR35 take home pay — worked examples 2025/26
These examples use 220 working days, no expenses, standard 1257L tax code, no student loan.
£400 day rate (£88,000 annual contract)
| Outside IR35 (Ltd) | Inside IR35 | Umbrella (£25/wk) | |
|---|---|---|---|
| Gross contract | £88,000 | £88,000 | £88,000 |
| Employer NI | −£1,185 | −£12,450 | −£12,450 |
| Corporation tax | −£8,156 | — | — |
| Umbrella fee | — | — | −£1,300 |
| Income tax | −£3,022 | −£23,874 | −£22,894 |
| Employee NI | −£1,546 | −£3,434 | −£3,334 |
| Dividend tax | −£11,476 | — | — |
| Take home | ~£58,400 | ~£48,242 | ~£47,322 |
£600 day rate (£132,000 annual contract)
| Outside IR35 (Ltd) | Inside IR35 | Umbrella (£25/wk) | |
|---|---|---|---|
| Gross contract | £132,000 | £132,000 | £132,000 |
| Employer NI | −£1,185 | −£18,975 | −£18,975 |
| Corporation tax | −£13,506 | — | — |
| Umbrella fee | — | — | −£1,300 |
| Income tax | −£9,022 | −£39,114 | −£37,954 |
| Employee NI | −£1,800 | −£3,734 | −£3,634 |
| Dividend tax | −£20,926 | — | — |
| Take home | ~£83,900 | ~£70,177 | ~£70,137 |
Figures are estimates. Use the calculator above for your exact numbers.
Frequently asked questions
How much more do I take home outside IR35?
At a £500 day rate working 220 days (£110,000 contract value), outside IR35 through a limited company typically gives you £12,000–£18,000 more per year than inside IR35, depending on expenses, director salary, and dividend extraction strategy. The calculator above shows your exact figure. The gap widens at higher day rates because more income falls into the dividend extraction advantage, and narrows at lower rates where corporation tax and accounting costs eat into the saving.
What is the difference between inside IR35 and an umbrella company?
Both result in your income being taxed like employment income — income tax and National Insurance deducted at source. The difference is administration. Inside IR35 through your own limited company still requires you to run a company and file accounts, even though the tax treatment is the same as employment. An umbrella company handles all of this for you, at a weekly fee of typically £15–£35. Most contractors inside IR35 choose an umbrella company for simplicity. Take home through an umbrella is slightly lower than deemed employment by the umbrella fee.
Who decides if I am inside or outside IR35?
For medium and large private sector clients, and all public sector clients, the end client determines your status and issues a Status Determination Statement. For small clients — those with turnover under £15 million, balance sheet under £7.5 million, and fewer than 50 employees — you determine your own status. If you disagree with a client’s determination, you have the right to challenge it through their formal disagreement process.
Can I still use a limited company if I am inside IR35?
Yes, but the tax advantages largely disappear. You can still use your company to manage multiple engagements, claim some business expenses, and potentially benefit from pension contributions through the company. However, the salary-and-dividend strategy that creates the outside IR35 take home advantage does not apply to income caught by IR35. Many contractors inside IR35 choose to close their limited company and work through an umbrella instead.
What expenses can I claim outside IR35?
Through your limited company, you can claim legitimate business expenses — travel to client sites (if not a single regular workplace), equipment, software subscriptions, professional insurance, accountancy fees, and training. These reduce your taxable company profits before corporation tax. Enter your annual expenses in the Advanced Options section of the calculator above to see the impact. You cannot claim a flat-rate expenses deduction inside IR35 — the 5% expenses allowance that previously applied to deemed employment was abolished from April 2021.
What is a Status Determination Statement?
A Status Determination Statement (SDS) is a written document that medium and large clients must give you when you start an engagement or when their IR35 determination changes. It states whether they consider your engagement inside or outside IR35 and gives the reasons for that decision. If you disagree, you can raise a formal dispute. The client must respond within 45 days. If they fail to do so, liability for the tax passes back to them.
How does the April 2025 employer NI increase affect me?
The employer NI rate increased from 13.8% to 15% in April 2025, and the threshold at which it starts dropped from £9,100 to £5,000. For contractors inside IR35, this means more of your assignment rate is deducted as employer NI before you receive any pay. On a £500 day rate over 220 days (£110,000), employer NI inside IR35 increased by approximately £1,400 per year compared to 2024/25. The calculator applies the 2025/26 rate automatically.
Should I use HMRC’s CEST tool?
HMRC’s Check Employment Status for Tax (CEST) tool is a useful starting point for assessing your IR35 status. However, it has been criticised for not always reflecting how tribunals interpret the case law — particularly around mutuality of obligation. CEST results are not binding on HMRC, though HMRC has stated it will stand behind CEST results where the tool was used correctly and the facts accurately entered. For significant contracts, a formal IR35 review from a specialist contractor accountant or barrister is worthwhile.
More calculators for contractors
UK Take Home Pay Calculator Standard PAYE take home pay calculator for any salary — covers all tax codes, pension, and student loan.
Scottish Take Home Pay Calculator For contractors based in Scotland — uses SRIT rates and compares your bill to England.
Salary Sacrifice & Pension Calculator Outside IR35 through a Ltd company, employer pension contributions are highly tax-efficient — no NI, and deductible against corporation tax. See the numbers here.
Reverse Take Home Pay Calculator Know the take home you need? Work backwards to find the day rate or contract value required.
About this calculator
This calculator is maintained by the team at Take Home Pay Calculators. All rates — employer NI, employee NI, income tax, corporation tax, and dividend tax — are taken from HMRC published sources for 2025/26 and 2026/27.
Outside IR35 assumes a single-director limited company. Single-director companies cannot claim the Employment Allowance. The optimal director salary shown (£12,570) uses the full personal allowance while incurring employer NI on the portion above £5,000.
Inside IR35 applies the deemed employment model — employer NI is deducted from the assignment rate before gross pay is calculated. The 5% expenses allowance that previously applied to deemed employment was abolished from April 2021 and is not included.
This calculator provides estimates. Your actual position depends on your specific circumstances, the terms of your engagement, and how IR35 applies to your particular contract. Consult a qualified contractor accountant for personalised tax advice and IR35 status review. Last updated July 2026.