Rates verified 5 May 2026 against HMRC off-payroll working (IR35) guidance. (See full methodology.)
2026/27 rates · Umbrella PAYE vs Limited company · Day-rate to take-home in seconds
Default 220 ≈ 44 billable weeks
Higher earners often benefit from expanding advanced options to model expenses, pension contributions, and VAT registration.
Annual difference
£2,114 more outside IR35
That's £176 more per month, or 3.1% better take-home
Inside IR35 (Umbrella PAYE)
£68,484
annual take-home (cash + pension)
Monthly net
£5,707
After-tax day rate
£311
Gross contract value£110,000
Umbrella margin−£1,300
Pension (salary sacrifice)−£5,500
Employer NI−£12,809
Gross PAYE salary£90,391
Income tax−£23,589
Employee NI−£3,818
Student loan£0
Net take-home (cash)£62,984
Pension pot contribution£5,500
Effective deduction rate: 37.74% · 220 working days
Outside IR35 (Limited Company)
£70,599
annual take-home (cash + pension)
Monthly net
£5,883
After-tax day rate
£321
Gross contract value£110,000
Business expenses−£5,000
Pension (company contribution)−£5,500
Director salary−£12,570
Employer NI on salary−£1,136
Corporation tax−£18,986
Dividends paid£66,809
Dividend tax−£14,280
Student loan (on salary)£0
Net take-home (cash)£65,099
Pension pot contribution£5,500
Effective deduction rate: 35.82% · 220 working days
Annual take-home comparison
Assumptions used
£12,570 director salary (matches personal allowance for tax efficiency)
Standard 2026/27 tax bands and personal allowance
Corporation tax marginal relief applied for profits £50k–£250k
Corporation tax uses HMRC's official marginal relief formula (fraction 3/200) — produces slightly higher tax than simpler interpolation models used by some competitor calculators.
Dividend allowance £500 (2026/27)
Employer NI 15% above £5,000 (umbrella scenario only)
Pension contributions modelled as company contributions (outside IR35) or salary sacrifice (inside IR35) for tax efficiency
Student loan applies to salary only, not dividends
VAT FRS surplus modelled at 14.5% rate for professional services if VAT registered
Apprenticeship levy not modelled (only applies to employers with >£3m payroll)
What is IR35 and why does it matter for contractors?
IR35 — officially the "off-payroll working rules" — is HMRC's framework for deciding whether a contractor working through their own limited company is genuinely self-employed or is effectively a "disguised employee" of the end client. Inside IR35 means HMRC views the engagement as employment: the contractor pays employed-equivalent income tax and National Insurance, with little scope for tax-efficient extraction. Outside IR35 means the contractor is genuinely running a business and can take advantage of corporate tax structures — director salary plus dividends, business expenses, employer pension contributions. Since April 2021, for most contracts with medium and large clients in the private sector (and since 2017 in the public sector), the client makes the IR35 determination, not the contractor. This calculator helps contractors understand the financial impact of either outcome — useful when negotiating day rates or weighing up two offers.
Inside IR35 vs outside IR35 — what's the take-home difference?
For a typical £500/day contract, contractors usually see £5,000–£15,000 more annual take-home outside IR35 than inside. At higher day rates the gap widens significantly. The difference comes from three structural advantages of outside-IR35 working: (a) National Insurance — outside IR35 contractors pay only minimal NI on a small director salary, while inside IR35 the worker pays full employee NI plus the umbrella absorbs employer NI from the contract value before salary is calculated; (b) corporation tax plus dividend tax is structurally lower than income tax plus NI for most income levels, even after the 2022/23 dividend tax rises; (c) outside IR35 contractors can deduct legitimate business expenses, reducing taxable profit. The gap has narrowed since dividend tax rose, but it remains substantial at higher day rates. High earners on day rates above £450 often find their inside-IR35 take-home falls into the £100k–£125,140 band where the personal allowance tapers — the dreaded 60% effective marginal rate. See our 60% tax trap calculator to model how a pension contribution can lift you out of that band. To compare against a standard employed take-home as a baseline, see our UK take-home pay calculator. For part-time contractors or those calculating reduced-hours scenarios, see our UK pro-rata salary calculator.
When can I work outside IR35 in 2026?
Whether a contract is genuinely outside IR35 depends on working practices, not the wording in the contract. HMRC examines three pillars: substitution (can you send a substitute?), control (does the client direct how, when and where you work?), and mutuality of obligation (must they offer work and must you accept?). With small clients (turnover under £10.2m, balance sheet under £5.1m, fewer than 50 employees) the contractor still self-determines their own status. With medium and large clients in the private sector, the client makes the determination and is liable for incorrect calls. The public sector has been client-determined since 2017. Incorrect determinations create retrospective tax liability — sometimes years' worth — so always assess working practices, not just contract wording. This calculator estimates take-home for both outcomes; it does not determine IR35 status.
Frequently asked questions
How much more do you take home outside IR35 vs inside IR35?
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At a £400/day rate the gap is typically £4,000–£7,000 a year; at £600/day it grows to £8,000–£12,000; and at £1,000/day many contractors see £15,000–£25,000 more outside than inside. The exact figure depends heavily on pension contributions, business expenses and whether you're VAT registered. Inside IR35 take-home tracks closely to PAYE employed pay; outside IR35 tracks closely to genuine self-employed take-home. The gap shrinks at very low day rates (where the personal allowance dominates) and grows as your day rate climbs into higher tax bands.
Is it illegal to work inside IR35 through a limited company?
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No. Plenty of contractors choose to work inside IR35 through their own limited company using a 'deemed payment' structure rather than via an umbrella. It's just less tax-efficient than working outside IR35 because the income is taxed as employment. Some contractors do this for non-tax reasons — continuity of company, professional indemnity insurance, retaining business expenses they still need to claim, or keeping a clean trading history for future outside-IR35 work.
Can I switch between inside and outside IR35 contracts?
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Yes — IR35 status is determined per-contract, not per-contractor. Many contractors run a mix and accept the tax treatment for each. Each contract gets its own determination from the client (for medium and large clients) or from the contractor themselves (for small clients). Keep clean records of working practices for each engagement, because HMRC can challenge determinations retrospectively up to 6 years (or 20 years where they consider the behaviour deliberate).
Do umbrella companies take more than the calculation shows?
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Possibly. This calculator assumes a standard weekly margin (default £25) and standard PAYE deductions. Some umbrellas advertise low margins but recover money via opaque charges — training fees, 'join-up' fees, pension salary-sacrifice without passing on the employer NI saving, expenses that are illusory, or padded holiday-pay accruals. Choose an FCSA-accredited umbrella and read the contract carefully. The umbrella's margin is the only fair charge — everything else is your statutory deductions.
Can I claim expenses inside IR35?
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Generally no. Since April 2016, contractors inside IR35 working through an umbrella cannot claim travel and subsistence (T&S) expenses. A few narrow exceptions exist for genuine multi-site working. The umbrella will reimburse expenses that are part of your engagement (e.g. client-paid mileage), but these don't reduce your taxable income. Outside IR35, your limited company can claim wholly-and-exclusively business expenses to reduce its corporation tax bill.
Should I take dividends or salary outside IR35?
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Most outside-IR35 contractors take a £12,570 salary (matching the personal allowance, so income-tax-free and below the employee NI threshold) plus dividends from post-corporation-tax profit. This is more tax-efficient than taking everything as salary because dividend tax rates are lower than income tax + employee NI. The £12,570 salary also keeps you accruing State Pension qualifying years. This calculator uses that standard structure. Higher salaries can be optimal in specific circumstances (large pension contributions, mortgage applications) but the £12,570/dividend split is the default.
Calcsmith provides estimates based on the information you enter and the 2026/27 tax bands. This calculator does not determine your IR35 status — only HMRC and case law do that. Not financial advice; consult a qualified contractor accountant for your situation.