IR35 Calculator 2026/27 – Inside vs Outside Contractor Take-Home

How the comparison is built

Inside IR35 (umbrella): the whole assignment income goes to the umbrella company. It deducts its margin, employer NI at 15% above £5,000 and the 0.5% apprenticeship levy, and pays the rest as your salary under PAYE.

Outside IR35 (limited company): your company invoices the client, pays expenses, pays you a salary of £12,570 (enough for a State Pension qualifying year with no employee NI), pays corporation tax on the profit, and distributes what is left as dividends. Corporation tax is 19% on profits up to £50,000, 25% above £250,000, with marginal relief in between.

Worked example: £500 a day for 220 days

£500 a day, 220 days, £3,000 company expenses, 2026/27

The contract is worth £110,000 a year. Inside IR35 the umbrella’s costs reduce the salary to around £95,000, and after PAYE tax and NI you keep £65,650. Outside IR35, after corporation tax and dividend tax, you keep £68,515.

Outside IR35 take-home£68,515limited company

Inside IR35 take-home: £65,650via umbrella
Difference per year: £2,865
Contract value: £110,000

Inside IR35 (umbrella PAYE)

Assignment income: £110,000.00
Umbrella margin: −£1,040.00
Employer NI: −£13,498.05
Apprenticeship levy (0.5%): −£474.94
Gross salary: £94,987.01
Income tax: −£25,426.80
Employee NI: −£3,910.34
Take-home: £65,649.87

Outside IR35 (limited company)

Company income: £110,000.00
Expenses: −£3,000.00
Director salary (£12,570) + employer NI: −£13,705.50
Corporation taxwith marginal relief: −£20,973.04
Dividends paid out: £72,321.46
Dividend tax: −£16,376.17
Take-home (salary + dividends): £68,515.29

What changed for 2026/27

The higher dividend rates (10.75% and 35.75%) narrow the gap between inside and outside IR35 slightly. Employer NI at 15% with a £5,000 threshold, introduced in April 2025, continues to weigh heavily on umbrella rates. Corporation tax rates are unchanged.

Tips

Negotiate the rate on status. An inside-IR35 role at the same day rate pays far less; many contractors ask for 20–30% more.
Check the umbrella’s figures. Compare the “gross salary” on your payslip with the assignment rate to see what came off before tax.
Challenge a wrong determination through the client’s disagreement process within 45 days.
Outside IR35, keep evidence of substitution rights, control and financial risk in your contract and in practice.

Questions people ask

What does inside IR35 mean?

The working arrangement would make you an employee if you were contracted directly, so tax and National Insurance must be deducted as if you were employed. You don't get employment rights, though.

Who decides IR35 status?

For contracts with medium and large private-sector clients and all public sector bodies, the client decides and must give you a status determination statement. For small clients, your own company decides.

Why is inside IR35 take-home so much lower?

The day rate has to cover employer National Insurance (15%), the apprenticeship levy and the umbrella company's margin before your salary is paid, and then your salary is taxed in full at PAYE rates.

Can I claim expenses inside IR35?

Generally no. Travel and subsistence relief is not available for deemed employment, which is one more reason the gap is wide.

This is an estimate based on published rates, not tax or financial advice. Your payslip or assessment may differ. We are an independent site, not affiliated with any government agency. Read the full disclaimer.

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