UK IR35 Inside vs Outside Calculator — Methodology

Last verified 5 May 2026 against HMRC off-payroll working (IR35) guidance. Calculator at /uk/salary/ir35-inside-vs-outside-calculator/.

What this calculator does

Compares contractor take-home pay under an inside-IR35 deemed-employment engagement versus an outside-IR35 limited company structure with salary plus dividends, after employer's NI, employee NI, income tax, and corporation tax.

The formula

Inside IR35 (paid via umbrella / fee-payer):
  fee_payer_cost = dayRate × days
  employer_ni = max(0, fee_payer_cost - secondaryThreshold) × 0.15
  apprenticeship_levy = fee_payer_cost × 0.005
  deemed_pay = fee_payer_cost - employer_ni - apprenticeship_levy
  net = deemed_pay - PAYE_tax(deemed_pay) - employee_NI(deemed_pay)

Outside IR35 (own Ltd company, salary + dividends):
  revenue = dayRate × days
  salary  = optimal_salary (≈ secondary threshold)
  profit  = revenue - salary - employer_ni(salary) - expenses
  corp_tax = profit × CT_rate (with marginal relief £50k–£250k)
  dividend = profit - corp_tax
  net = salary - PAYE - NI
      + dividend - dividend_tax(dividend)

Comparison:
  delta = outside_net - inside_net

Authoritative sources

• Off-payroll working (IR35) for clients
• IR35 fee-payer responsibilities
• Corporation Tax rates
• Tax on dividends
• Apprenticeship Levy

Assumptions and limitations

• Outside-IR35 modelling assumes a sole director taking an optimal salary at the secondary NI threshold and the rest as dividends.
• Apprenticeship Levy (0.5%) is included in fee-payer cost; small-employer Employment Allowance is not modelled.
• VAT, FRS, and expense recovery beyond a single 'expenses' input are out of scope.
• Corporation tax marginal relief uses the standard fraction 3/200 between £50,000 and £250,000.
• Status determination is the user's responsibility — this calculator does not perform CEST.

Source data

The rates used by this calculator are exported as machine-readable CSVs:

• Income tax rUK 2026/27 /data/income-tax-rUK-2026-27.csv
• National Insurance 2026/27 /data/national-insurance-2026-27.csv

These CSVs regenerate automatically from our canonical rate data at every build, ensuring the calculator output and the published rate data stay in sync.

Verification log

• 5 May 2026: Corporation tax bands, dividend rates, and NI thresholds verified against gov.uk publications