Inside IR35 Calculator

IR35 status is the single thing that decides how much of your day rate you actually keep. Get it wrong and HMRC can come after you for years of back tax, interest and penalties. This inside IR35 calculator puts both outcomes side by side: your take-home if the contract is inside IR35, next to what the same rate looks like outside — using the same working pattern and the 2026/27 tax and National Insurance rates.

It’s an independent tool. We’re not an umbrella company or an accountancy firm, so there’s no consultation to book and no sales pitch at the end. Enter your day rate and working pattern, and you’ll see the maths — every deduction shown, nothing hidden.

How this inside IR35 calculator works

Inside IR35, your contract income is taxed broadly as if it were a salary. Whether you’re paid through an umbrella company, your agency’s payroll, or your own limited company under the deemed payment rules, the starting logic is the same: employer costs come off first, and then you’re taxed like an employee.

Here’s the formula this calculator follows, step by step:

1. Contract value = day rate × days worked. A £450 day rate, 5 days a week, 46 weeks a year gives £103,500.
2. Employer’s National Insurance = 15% × (contract value − £5,000). This is the bit that catches people out. The fee-payer doesn’t pay this on top of your rate — it comes out of your rate, because under the off-payroll rules they have to account for employer NI as if you were their employee.
3. Deemed gross pay = contract value − employer’s NI. This is the figure your personal tax is calculated on.
4. Income tax at 20%, 40% and 45% on the deemed gross, after your £12,570 personal allowance.
5. Employee National Insurance at 8% on earnings between £12,570 and £50,270, and 2% above that.
6. Take-home pay = deemed gross pay − income tax − employee NI.

Outside IR35 the route is completely different: your limited company receives the contract value gross, and you draw income from it after corporation tax. The comparison in the examples below is deliberately simplified — it isolates the tax effect of the IR35 status itself rather than modelling a full limited company, because corporation tax sits outside the scope of this calculator.

2026/27 rates used by this calculator

Band	Taxable income	Income tax	Employee NI
Personal allowance	Up to £12,570	0%	0%
Basic rate	£12,571 – £50,270	20%	8%
Higher rate	£50,271 – £125,140	40%	2%
Additional rate	Over £125,140	45%	2%

Employer’s National Insurance is charged at 15% on amounts above £5,000 a year. The personal allowance tapers by £1 for every £2 of income over £100,000, disappearing entirely at £125,140. Scottish taxpayers pay Scottish income tax rates instead of the ones above — the bands and rates differ, so treat the worked examples below as England, Wales and Northern Ireland.

Worked example 1: £450 a day, inside IR35

Take a contractor on £450 a day, working 5 days a week for 46 weeks of the year. That’s a contract value of £103,500 (450 × 5 × 46). Here’s how the inside IR35 figure builds up, line by line:

1. Employer’s NI: 15% × (£103,500 − £5,000) = 0.15 × £98,500 = £14,775
2. Deemed gross pay: £103,500 − £14,775 = £88,725
3. Income tax: basic rate 20% × £37,700 = £7,540; higher rate 40% × (£88,725 − £50,270 = £38,455) = £15,382; total £22,922
4. Employee NI: 8% × £37,700 = £3,016; 2% × £38,455 = £769.10; total £3,785.10
5. Take-home: £88,725 − £22,922 − £3,785.10 = £62,017.90

Now the simplified comparison. Taxing the same £103,500 as employment income without the employer NI haircut — purely to isolate the IR35 effect: income tax of £7,540 + 40% × (£103,500 − £50,270 = £53,230) = £7,540 + £21,292 = £28,832; employee NI of £3,016 + 2% × £53,230 = £3,016 + £1,064.60 = £4,080.60; take-home £103,500 − £28,832 − £4,080.60 = £70,587.40. The IR35 status alone costs about £8,570 a year on this rate. Remember this is a simplified illustration, not a promise: a genuine outside-IR35 route runs through a limited company, where corporation tax applies to company profits before dividends can be drawn.

Worked example 2: £300 a day, inside IR35

A £300 day rate, 5 days a week, 48 weeks a year gives a contract value of £72,000 (300 × 5 × 48):

1. Employer’s NI: 0.15 × (£72,000 − £5,000) = 0.15 × £67,000 = £10,050
2. Deemed gross pay: £72,000 − £10,050 = £61,950
3. Income tax: £7,540 + 40% × (£61,950 − £50,270 = £11,680) = £7,540 + £4,672 = £12,212
4. Employee NI: £3,016 + 2% × £11,680 = £3,016 + £233.60 = £3,249.60
5. Take-home: £61,950 − £12,212 − £3,249.60 = £46,488.40

Notice how the employer NI step takes a bigger proportional bite at lower rates — £10,050 out of £72,000 is nearly 14% gone before your own tax is even calculated. That’s why inside IR35 roles at modest day rates can feel particularly poor value next to permanent employment.

Who decides whether you’re inside IR35?

Since April 2021, for most private-sector contracts it is the end client — not you, and not your agency — that must determine your IR35 status and give you a Status Determination Statement (SDS) setting out their reasoning. The public sector has worked this way since 2017. If the client hasn’t issued an SDS, or the reasoning looks like a copy-paste job, raise it before you sign: the tax liability generally sits with whoever got the determination wrong, but you’ll still want the decision in writing.

Be wary of any contract offered as “definitely outside IR35” with no SDS and no questions about how you’ll actually work day to day. A genuine outside determination looks at working practices — control, substitution, mutuality of obligation — not just what the contract says. HMRC’s own CEST tool is one way clients check, but it’s the client’s conclusion, documented in the SDS, that counts.

Deemed payment, umbrella or agency PAYE — does the route change the maths?

Barely. If you’re inside IR35 and paid through your own limited company, the deemed payment rules treat the contract income as salary at the tax year end, and the numbers come out within a few pounds of the umbrella route. The real differences are practical rather than fiscal: an umbrella handles the admin and gives you continuous employment (useful for mortgage applications and for statutory rights that accrue with service), agency PAYE is simplest of all but ties you to that agency, and your own company means accountancy fees for no tax advantage.

One genuine difference is pensions. Through an umbrella or agency payroll you can often salary-sacrifice pension contributions, which reduces both your tax and your NI. Through a limited company on the deemed payment route, pension contributions work differently and the admin rarely justifies it for a single contract. If pensions matter to you — and on a long inside-IR35 contract they should — ask the umbrella about salary sacrifice before you sign, not after.

What your inside IR35 calculator result means — and what to do next

If your contract is inside IR35, you have three realistic payment routes: an umbrella company, your agency’s payroll, or your own limited company under the deemed payment rules. The tax outcome is near-identical across all three — the difference is admin and cost. Most contractors pick an umbrella or agency PAYE because running a limited company for a single inside-IR35 contract means accountancy fees for no tax benefit.

A few things worth doing with your result in hand:

• Run the umbrella numbers too. The umbrella margin (typically £20–£30 a week) comes off on top of everything calculated here. Our umbrella company calculator shows that route in full.
• Check pension options. Inside IR35 you’re still entitled to the same pension tax relief as any employee, and salary sacrifice through an umbrella or agency payroll can be worth asking about.
• Be realistic about expenses. You can only claim what an ordinary employee could claim — commuting to a single regular workplace generally doesn’t count.
• Get advice before a long commitment. If the take-home figure makes you wince, talk to a contractor accountant before signing a 12-month contract on the wrong basis. An hour of advice is cheap next to a year of the wrong structure.

What this calculator doesn’t cover

• Umbrella company margins — typically £20–£30 a week, on top of the figures above.
• Pension contributions and salary sacrifice, which reduce your taxable pay.
• Student loan repayments, which come off after tax.
• Business expenses and the VAT flat rate scheme.
• The outside-IR35 comparison is simplified. A real limited-company route involves corporation tax on company profits and dividend tax on what you draw — neither is modelled here.
• Scottish income tax rates. The examples use England, Wales and Northern Ireland rates.

Frequently asked questions