Contractor Tax Tool
IR35 Calculator — Inside vs Outside Take-Home Pay
Inside IR35: this comparison treats your input as a total assignment budget, including employer NI. The remaining deemed salary is subject to PAYE income tax and employee NI. Outside IR35: the same amount is company revenue before legitimate business expenses, salary costs, corporation tax and dividend tax. Take-home depends on your inputs; there is no fixed retention percentage.
Tax Year
2026/27
Authority
HMRC
Enter the total annual assignment budget, excluding VAT, or its equivalent day rate to compare estimated take-home inside and outside IR35 using 2026/27 rates. The inside budget includes employer NI; it is not an agreed gross wage or a fee payable to your PSC with employer NI funded separately. The outside comparison treats the same amount as company revenue.
Your Contract Details
Total annual budget before employer NI, excluding VAT. For inside IR35, employer NI is funded within this amount before calculating gross deemed salary. Do not enter an agreed gross wage or a PSC fee with employer NI paid separately.
Total assignment budget per billable day, including the inside employer NI cost and excluding VAT. Annual budget equals this rate multiplied by billable days; leave and gaps between contracts are unpaid in this illustration.
Default: statutory 15% employer NI above the annual £5,000 secondary threshold. This models a total assignment budget, not a deduction from an agreed gross wage. Changing the rate models a hypothetical assumption; negotiating a contract does not change statutory NI rates.
Annual difference
£0 more per year outside IR35
Inside IR35
Off-payroll / PAYE
Annual net pay
£0
Monthly
£0
Tax + NI paid
£0
Income Tax
£0
Employee NI
£0
Deemed Salary
£0
Assignment budget less employer NI cost; no 5% allowance
Outside IR35
Ltd Company (PSC)
Annual net income
£0
Monthly
£0
Total Tax
£0
Corp Tax
£0
Dividend Tax
£0
Director Salary
£0
Optimised to personal allowance
How the IR35 calculator works
Enter a total annual assignment budget excluding VAT (or the budget per billable day multiplied by billable days). Both scenarios start with the same budget. Inside IR35, gross deemed salary plus employer NI equals that budget; outside IR35, it is company revenue before expenses and taxes.
This models a total assignment budget including employer NI for a Chapter 10 public-sector or medium/large private-sector engagement. Employer NI is a cost of the deemed employer, not a deduction from an already-agreed gross wage. The 5% allowance does not apply under Chapter 10; older Chapter 8 rules for small private clients require a separate calculation.
Outside IR35: The calculator models the illustrative limited company structure. It takes your contract value, deducts your allowable business expenses, then pays you a director's salary of £12,570 (equal to the personal allowance, with employer NI included and personal allowance tested against total income). The remaining revenue is subject to corporation tax at 19% (for profits up to £50,000) or with marginal relief up to 25% for profits over £250,000. The post-corporation-tax profit is then paid as dividends. The first £500 of dividends is tax free; above that you pay 10.75% at basic rate, 35.75% at higher rate, and 39.35% at additional rate.
The difference between the two net figures is highlighted in the green (or red) banner at the top of the results. The full breakdown accordion shows every step of the calculation for both scenarios.
What you need to know about IR35 in 2026/27
IR35 — formally the Intermediaries Legislation — has been part of UK tax law since 2000. It targets contractors who operate through a personal service company (PSC) but whose working relationship with a client is effectively one of employment. HMRC's concern is that contractors avoid paying employee income tax and NI by routing income through a company, which is taxed more favourably.
Who decides IR35 status? For public sector engagements (from April 2017) and medium or large private sector companies (from April 2021), the end client decides IR35 status. Small private-sector clients that meet the statutory size tests generally leave the decision to the contractor's PSC; employee headcount alone does not determine client size.
The three tests: HMRC applies three key employment status tests. Substitution — can you send a replacement worker? Control — does the client control how and when you work? Mutuality of obligation — is there an ongoing obligation for the client to offer work and for you to accept it? Strong rights of substitution and low control both point towards outside IR35.
This models a total assignment budget including employer NI for a Chapter 10 public-sector or medium/large private-sector engagement. Employer NI is a cost of the deemed employer, not a deduction from an already-agreed gross wage. The 5% allowance does not apply under Chapter 10; older Chapter 8 rules for small private clients require a separate calculation.
Umbrella companies: Many contractors working inside IR35 use an umbrella company rather than maintaining their own PSC. You become an employee of the umbrella, which handles PAYE. You receive holiday pay and statutory benefits, but take-home pay is typically similar to (or slightly less than) being inside IR35 through your own PSC. Use our PAYE vs Umbrella vs Ltd calculator to compare all three arrangements.
CEST tool: HMRC's Check Employment Status for Tax tool is available free on GOV.UK. It asks a series of questions about working practices and gives a determination. HMRC will stand by the result if you answer honestly. However, around 20% of queries result in "unable to determine" — in which case you should seek a specialist IR35 review.
Frequently asked questions about IR35
What is IR35 and does it apply to me?
IR35 applies when a contractor supplies services through a personal service company (PSC) but would be an employee for tax purposes if engaged directly. Public sector and medium or large private-sector clients generally determine status under Chapter 10. For small private-sector clients, the PSC generally determines status under Chapter 8. Client size depends on statutory tests, not employee headcount alone.
How much more do contractors earn outside IR35?
Outside IR35, a contractor may retain more take-home from the same contract revenue by taking a low salary plus dividends and deducting legitimate business expenses before calculating company profit. Corporation tax, dividend tax and employer NI on salary still apply, and expenses are actual costs, not extra take-home. Figures such as 15–25% more take-home are illustrative, not a typical or guaranteed uplift: the difference depends on revenue, expenses, tax bands and how employer NI is funded. Inside IR35, PAYE income tax and employee NI apply to the deemed payment using normal allowances and thresholds, while the fee-payer pays employer NI. This calculator compares the same total assignment budget, including employer NI on the inside scenario, rather than an identical agreed gross wage.
What happens if HMRC says I am inside IR35?
Under Chapter 10 off-payroll rules, the fee-payer acting as deemed employer (usually the agency or client) deducts PAYE income tax and employee National Insurance at source before paying your PSC, and pays employer National Insurance on top. Employer NI cannot be deducted from an already-agreed gross payment to your PSC. A retrospective status challenge can lead to back taxes, interest and potentially penalties for the party liable under the rules. For small private-sector clients under Chapter 8, your PSC generally determines status and accounts for the tax and NI itself.
Can I still use a limited company if I am inside IR35?
Yes. Under Chapter 10, the fee-payer deducts PAYE tax and employee NI before paying your PSC. Relief prevents the same deemed payment being taxed again when the PSC passes it to you as salary or dividends, subject to the applicable rules. Keeping a PSC still involves administration; working through an umbrella company is another option. Being inside IR35 for tax purposes does not itself give you employment rights against the client.
What is the 5% expenses allowance inside IR35?
The flat 5% allowance covers general costs of running a PSC when calculating a deemed employment payment under the original Chapter 8 IR35 rules. It does not apply under Chapter 10 off-payroll rules for public sector or medium and large private-sector clients; it was removed for engagements brought into those rules. It remains available under Chapter 8 for small private-sector clients where the PSC determines its own status. This calculator models Chapter 10 inside IR35 and therefore applies no 5% allowance.
How do I check my IR35 status?
HMRC provides a free tool called CEST (Check Employment Status for Tax) at GOV.UK. It asks questions about substitution rights, control and mutuality of obligation and gives a determination. HMRC will stand behind the result if you answer honestly. For high-value or complex contracts, consider a specialist IR35 contract review from a qualified tax adviser who can assess your actual working practices rather than just the written contract.
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Outside-IR35 estimates assume one company, a full 12-month period, no associated companies, no Employment Allowance and all available profit distributed. They do not determine IR35 status. The inside comparison excludes umbrella margins, apprenticeship levy, holiday pay and pension costs.