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?

In this calculator outside IR35 comes out ahead at typical day rates, before company running costs such as accountancy (enter those as expenses). Inside IR35 this calculator assumes your rate also has to cover employer NI (15% above the secondary threshold in 2026/27), as an umbrella arrangement does, so the deemed salary is lower than the headline rate. That is a pricing assumption: under the Chapter 10 rules (public-sector, medium and large clients) HMRC says the fee-payer pays employer NI on top of the deemed direct payment, which would raise the inside figure. Outside, the company pays Corporation Tax and you pay dividend tax. Enter your rate in both modes to see the gap for your own figures.

How do you model outside IR35?

We use the standard structure: a director salary at the Personal Allowance (no Income Tax), the company's employer NI on that salary (a sole-director company cannot claim Employment Allowance), Corporation Tax on what is left, and the rest paid as dividends. Your £500 dividend allowance applies, then 10.75%/35.75%/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. Before 1 April 2023 there was a single 19% rate.

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).

£700/day Inside IR35 UK 2026/27

Contractor at £700/day across 220 working days a year operating Inside IR35: gross turnover £154,000, take-home £83,106 a year. That's £5,175 less than running this engagement Outside IR35.

Inside IR35

£83,106

Turnover £154,000 / 220 days

Outside IR35

£88,281

See full breakdown

Inside IR35 take-home is before any umbrella company margin and before the 0.5% Apprenticeship Levy where it is passed on; outside IR35 take-home is before accountant and Companies House costs.

Inside IR35 mechanics

Inside IR35 the income is taxed as employment income. This calculator assumes the £700/day x 220 days = £154,000 has to cover employer National Insurance as well as your pay, which is how an umbrella company works: its reconciliation statement takes off its margin, employer NI, employer pension contributions, holiday pay and any Apprenticeship Levy, and your gross pay is what is left (HMRC). On that assumption £19,435 goes on employer NI and the remaining £134,565 is taxed through PAYE Income Tax (20% / 40% / 45% bands) and Class 1 employee NI (8% main rate, 2% above the upper earnings limit). The umbrella margin is not modelled and would lower the figure.

Outside an umbrella the law depends on the client. Where the rate is paid to your own limited company and a public-sector, medium or large client (or an agency) operates the off-payroll rules (Chapter 10) as fee-payer, HMRC says employer NI cannot be deducted from the deemed direct payment and is paid on top (HMRC fee-payer guidance). If the full £154,000 is your deemed direct payment, PAYE applies to all of it and take-home is about £93,406 a year. With a small private-sector client (Chapter 8) your own company works out the deemed employment payment, and the law does take employer NI out of it (ITEPA 2003 s.54, step 8), after a flat 5% deduction for expenses (step 1).

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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?: In this calculator outside IR35 comes out ahead at typical day rates, before company running costs such as accountancy (enter those as expenses). Inside IR35 this calculator assumes your rate also has to cover employer NI (15% above the secondary threshold in 2026/27), as an umbrella arrangement does, so the deemed salary is lower than the headline rate. That is a pricing assumption: under the Chapter 10 rules (public-sector, medium and large clients) HMRC says the fee-payer pays employer NI on top of the deemed direct payment, which would raise the inside figure. Outside, the company pays Corporation Tax and you pay dividend tax. Enter your rate in both modes to see the gap for your own figures.
How do you model outside IR35?: We use the standard structure: a director salary at the Personal Allowance (no Income Tax), the company's employer NI on that salary (a sole-director company cannot claim Employment Allowance), Corporation Tax on what is left, and the rest paid as dividends. Your £500 dividend allowance applies, then 10.75%/35.75%/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. Before 1 April 2023 there was a single 19% rate.
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).