What does inside / outside IR35 mean?

Inside IR35 means HMRC treats your contract as disguised employment - you're taxed as a PAYE employee of the end client (or umbrella). Outside IR35 means you're genuinely self-employed and can operate through your own limited company.

Is outside IR35 still worth it post-2024 NI cuts?

Less so than before. With employee NI cut to 8%, Class 4 NI to 6%, and Corporation Tax up to 26.5% marginal, the gap has narrowed to a few thousand pounds at typical contractor rates. Still worth it at lower turnover (<£80k), closer to a wash at £100k+.

How do you model outside IR35?

We use the standard 'tax-efficient' structure: £12,570 director salary (uses full Personal Allowance, no Income Tax) + all remaining post-CT profits as dividends. Your £500 dividend allowance applies, then 8.75%/33.75%/39.35% dividend rates.

What Corporation Tax rate do you apply?

From April 2023: 19% on the first £50,000 of profit, effectively 26.5% on the marginal band £50,000-£250,000, and 25% above £250,000. 2023-24 used flat 19% for small profits before the reform took effect.

Do you model IR35 pre-April-2021 rules?

No - we assume the post-2021 off-payroll rules where IR35 status is determined by the end client (for medium/large businesses) or by you (for small-client engagements).

UK Contractor Calculator 2026/27: IR35

Compare UK contractor take-home inside vs outside IR35 for 2026/27. Uses current Corporation Tax and the £12,570 director salary + dividend split.

Take-home pay

£72,090

34.5% effective tax rate

Monthly: £6,008
Weekly: £1,386
Daily: £277
Hourly: £36.97

Annual turnover	£110,000
Director salary (PA £12,570)	£12,570
Corporation Tax	−£22,069
Dividend tax	−£15,841
Income Tax (PAYE)	−£0
National Insurance	−£0
Take-home	£72,090

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How contractor take-home works

Your status under the IR35 / off-payroll rules determines which tax regime applies.

Inside IR35

You’re treated as a PAYE employee of the end client (or umbrella company). Your full day-rate income passes through PAYE — Income Tax, Employee NI, often an apprenticeship levy charge. Net result resembles a normal salary at the equivalent annual gross.

Outside IR35

You’re genuinely self-employed and operate through a limited company. The usual structure is:

Pay yourself a £12,570 director salary (uses Personal Allowance, no Income Tax, minimal Class 1 NI).
Corporation Tax on remaining profits: 19% up to £50k, ~26.5% marginal in the £50–250k band, 25% above.
Take post-CT profits as dividends: £500 tax-free allowance, then 8.75% / 33.75% / 39.35% based on the band your total income falls in.

The gap has narrowed post-2024

Three reforms reduced the outside-IR35 advantage:

Employee NI cut from 12% → 8% (April 2024).
Class 4 NI cut from 9% → 6%.
Corporation Tax rose from flat 19% to up to 26.5% marginal.

At typical contractor day rates (£400-£600) and 220-day years, the take-home gap is now only a few thousand pounds per year — not the £5k+ it used to be. At lower day rates (£200-£300), outside IR35 still wins clearly.

What we don’t model

Employers NI on inside-IR35 income (umbrella companies typically deduct this from your rate before PAYE, reducing your effective gross).
Flat Rate VAT scheme savings (usually £500-£2,000 a year for outside IR35).
Pension contributions from limited-company profits (employer pension relief is still a major outside-IR35 advantage).
Entrepreneurs’ Relief / Business Asset Disposal Relief on company wind-up.

For these, consult a chartered accountant specialising in contractors.

IR35 Explained — the off-payroll status tests and how inside vs outside changes your take-home.
Sole Trader vs Limited Company 2026/27 — the tax-efficiency picture after the 2024 NI and CT changes.
Self Assessment 2026/27 — filing deadlines and payments on account for outside-IR35 contractors.
Salary Sacrifice Explained — why most limited-company contractors extract pension via employer contributions instead.

Frequently asked questions

What does inside / outside IR35 mean?: Inside IR35 means HMRC treats your contract as disguised employment - you're taxed as a PAYE employee of the end client (or umbrella). Outside IR35 means you're genuinely self-employed and can operate through your own limited company.
Is outside IR35 still worth it post-2024 NI cuts?: Less so than before. With employee NI cut to 8%, Class 4 NI to 6%, and Corporation Tax up to 26.5% marginal, the gap has narrowed to a few thousand pounds at typical contractor rates. Still worth it at lower turnover (<£80k), closer to a wash at £100k+.
How do you model outside IR35?: We use the standard 'tax-efficient' structure: £12,570 director salary (uses full Personal Allowance, no Income Tax) + all remaining post-CT profits as dividends. Your £500 dividend allowance applies, then 8.75%/33.75%/39.35% dividend rates.
What Corporation Tax rate do you apply?: From April 2023: 19% on the first £50,000 of profit, effectively 26.5% on the marginal band £50,000-£250,000, and 25% above £250,000. 2023-24 used flat 19% for small profits before the reform took effect.
Do you model IR35 pre-April-2021 rules?: No - we assume the post-2021 off-payroll rules where IR35 status is determined by the end client (for medium/large businesses) or by you (for small-client engagements).

Other UK tax calculators that pair with the Contractor.