UK IR35 Calculator 2026/26 โ Inside vs Outside IR35
Calculate your net income inside vs outside IR35. PAYE route vs dividend route comparison. Includes NI employer/employee, corporation tax, and dividend tax.
ยฃ
Your agreed daily rate with client Typically 220โ230 for contractors
ยฃ
Equipment, professional fees, travel, home office ยฃ
Optimal = ยฃ12,570 (NI threshold) or lower Day rates:
ยฃ0
Outside IR35 Net Income
ยฃ0
Inside IR35 Net Income
ยฃ0
Outside IR35 Advantage
ยฃ0
Gross Contract Value
Inside IR35 โ PAYE Route
Outside IR35 โ Dividend Route
How IR35 Affects Your Take-Home Pay
The difference between inside and outside IR35 can be substantial โ often ยฃ10,000โยฃ30,000 per year for higher-rate earners. Understanding both routes helps you make informed contracting decisions.
Inside IR35 Formula
Gross Contract Value = Day Rate ร Days Per Year
Deemed Employment Income = Gross โ 5% allowance
Employer NI (13.8%) deducted from deemed income
Employee NI (8%/2%) + Income Tax (PAYE) applied
Net Income = Deemed Income โ All NI โ Income Tax
Deemed Employment Income = Gross โ 5% allowance
Employer NI (13.8%) deducted from deemed income
Employee NI (8%/2%) + Income Tax (PAYE) applied
Net Income = Deemed Income โ All NI โ Income Tax
Outside IR35 Formula
Company Revenue = Day Rate ร Days Per Year
Deductions: Salary + Expenses + Employer NI on salary
Company Profit (before Corp Tax)
Corporation Tax: 19% (โคยฃ50K profit) or 25% (>ยฃ250K)
Net Dividends = Post-Tax Profit
Dividend Tax: 0% (first ยฃ500) / 8.75% / 33.75% / 39.35%
Personal Net = Salary (after personal IT/NI) + Net Dividends
Deductions: Salary + Expenses + Employer NI on salary
Company Profit (before Corp Tax)
Corporation Tax: 19% (โคยฃ50K profit) or 25% (>ยฃ250K)
Net Dividends = Post-Tax Profit
Dividend Tax: 0% (first ยฃ500) / 8.75% / 33.75% / 39.35%
Personal Net = Salary (after personal IT/NI) + Net Dividends
Extended
IR35 Status Checklist & Detailed Breakdown
Employment status tests (control, substitution, MOO) plus full tax computation for both routes
Answer these key questions to assess your likely IR35 status. This is educational โ not legal advice. Consult a qualified IR35 specialist for a formal determination.
| Test | Suggests Outside IR35 | Suggests Inside IR35 |
|---|---|---|
| Control | You decide how and when to do the work | Client controls your hours, methods, and location |
| Substitution | You can send a substitute; client has agreed this in writing | You personally must do the work; no substitution allowed |
| Mutuality of Obligation | No obligation to accept further work; project-based engagement | Ongoing obligation to offer/accept work; like employment |
| Equipment | You provide your own equipment and tools | Client provides equipment, laptop, office space |
| Financial Risk | You bear financial risk (bad debt, rectification costs) | No financial risk; paid regardless of output |
| Integration | You are clearly a vendor/supplier, not part of team | You appear on org charts, attend all-hands, have team badge |
| Exclusivity | You work for multiple clients simultaneously | You are exclusively dedicated to one client |
Full year-by-year equivalent tax comparison.
| Item | Inside IR35 | Outside IR35 |
|---|
Frequently Asked Questions
What is IR35 and how does it affect contractors?
IR35 is UK tax legislation designed to prevent "disguised employment" โ where a contractor works like an employee but operates through a limited company to pay less tax. If your contract is "inside IR35," HMRC considers you effectively employed and taxes you on PAYE (income tax + NI employee + NI employer deducted from your rate). If "outside IR35," you can use the tax-efficient limited company route with dividends.
What does "inside IR35" mean for my tax?
Inside IR35: your contract rate is treated as deemed salary. Your engager (client) deducts PAYE income tax (20%/40%/45%) plus employee NI (8%/2%) from what they pay your company. The engager also pays employer NI (13.8%) on top of your rate โ which is effectively funded from your contract day rate. A 5% expenses allowance is deducted before calculation. Net result: you pay significantly more tax than outside IR35.
What is the most tax-efficient outside IR35 structure?
Outside IR35, the typical structure is: (1) Pay yourself a small salary up to the NI threshold (ยฃ12,570) โ tax-free with no employee NI. (2) Claim legitimate business expenses. (3) Extract remaining profit as dividends: 0% on first ยฃ500 (dividend allowance), 8.75% basic rate, 33.75% higher rate, 39.35% additional rate. Corporation tax of 19% (small profits) or 25% (above ยฃ250K) applies first on company profits.
How is the IR35 determination made?
HMRC uses three main tests: (1) Control โ does the client control how, when, and where you work? High control suggests employment. (2) Substitution โ can you send a substitute to do the work? Genuine substitution rights suggest self-employment. (3) Mutuality of Obligation โ is the client obliged to offer work and are you obliged to accept it? MOO suggests employment. CEST (Check Employment Status for Tax) is HMRC's tool, but it's not always determinative.
Who is responsible for determining IR35 status?
Since April 2021 (off-payroll working rules reform), for medium and large private sector clients, the end client (not the contractor) is responsible for determining IR35 status and issuing a Status Determination Statement (SDS). For small companies (2 of 3: <50 staff, <ยฃ10.2M turnover, <ยฃ5.1M balance sheet), the contractor still determines their own status. Public sector clients have been responsible since April 2017.