UK Contractor Take-Home Calculator
Compare Outside IR35, Inside IR35, PAYE, and Umbrella company income instantly with a premium contractor calculator.
Outside IR35
Inside IR35
PAYE
Umbrella
Inside IR35 vs Outside IR35 — What's the Actual Difference?
Most contractors lose between £8,000 and £18,000 per year moving from outside to
inside IR35. The exact figure depends on your day rate — use the calculator above
to see your personal number.
Here’s why the gap exists:
Outside IR35 — you operate via a limited company. You pay yourself a low salary
(equal to the Personal Allowance, £12,570) and take the rest as dividends taxed at
8.75% (basic rate) or 33.75% (higher rate). Corporation tax at 19% applies to profits
up to £50,000. Total effective tax is significantly lower than employment income.
Inside IR35 — your contract income is treated as employment income. Employer NI at
15% is deducted first (reducing the money available to you). Then employee NI and
income tax apply at standard rates. You lose all dividend tax advantages. On a £500/day
rate working 220 days, this typically means taking home around £15,000–£20,000 less
per year compared to outside IR35.
The calculator above runs both scenarios simultaneously so you can see the exact
difference for your rate in seconds.
Umbrella Company vs PAYE — Which Is Better Inside IR35?
If your contract is inside IR35, you have two main options: work through an umbrella
company or take a PAYE contract directly. Here’s the practical difference:
PAYE directly means you’re paid as an employee with no intermediary. Tax and NI
are deducted by the client’s payroll. It’s the simplest arrangement but offers no
flexibility on expenses or pension contributions.
Umbrella company works as an intermediary employer. The umbrella deducts its
margin fee (typically £15–£30/week, or £1,000–£1,500/year) before processing your
payroll. In return, you get employment rights, statutory sick pay, and holiday pay
accumulation. For most contractors, the umbrella fee is worth it for the employment
protections and simplified admin.
The net take-home difference between umbrella and PAYE is usually small (£1,000–
£1,500/year, equal to the umbrella fee). Use the calculator above with the annual
umbrella fee field to see your exact comparison.
Important change from April 2026: HMRC is shifting PAYE responsibility for umbrella
workers to the employment agency or end client. This won’t change your take-home pay
but does change who is administratively responsible for ensuring correct tax deductions.
How to Use This IR35 Calculator
1. Enter your day rate — use your gross contract day rate before any deductions.
2. Set working days per year — most contractors use 220–230 days. Adjust for your
actual contract days.
3. Add annual business expenses — legitimate business costs (software, equipment,
professional subscriptions). Outside IR35 only — deducted before corporation tax.
4. Set pension contribution % — salary sacrifice pension contributions reduce your
taxable income in all scenarios.
5. Read your results — the four tabs show net take-home, effective tax rate, and
key deduction breakdowns for each scenario.
All calculations use confirmed 2025/26 HMRC rates. The calculator does not account for
Scottish income tax rates (which differ from the rest of the UK), student loan
repayments, or high-income Child Benefit charge.
IR35 Take-Home Pay Examples — 2025/26
The table below shows estimated annual take-home pay for common UK contractor day
rates under each scenario. All figures assume 220 working days, £5,000 expenses,
no pension contribution.
| Day Rate | Outside IR35 | Inside IR35 | Umbrella (£1,200 fee) | PAYE |
|---|---|---|---|---|
| £300/day | £44,800 | £36,200 | £35,100 | £36,300 |
| £400/day | £57,900 | £46,100 | £44,900 | £46,200 |
| £500/day | £70,400 | £56,800 | £55,600 | £56,900 |
| £600/day | £81,200 | £66,300 | £65,100 | £66,400 |
| £700/day | £91,800 | £75,700 | £74,500 | £75,800 |
| £800/day | £101,200 | £85,000 | £83,800 | £85,100 |
Estimates based on 2025/26 tax rates. Individual figures will vary. Use the calculator above for your personal calculation. Always consult a qualified accountant for tax planning decisions.
What Is IR35? A Plain English Guide for Contractors
IR35 (officially the “off-payroll working rules”) is HMRC legislation designed to
prevent what they call “disguised employment” — where a contractor does the same work as an employee but pays significantly less tax by working through a limited company.
The rules were introduced in 2000, reformed for the public sector in 2017, and extended to medium and large private sector businesses in April 2021.
IR35 status is determined by three key tests:
– Control — Does the client control how, when, and where the work is done? If yes,
this points toward inside IR35.
– Substitution — Can you send a substitute to do the work instead of you? If yes,
this points toward outside IR35.
– Mutuality of obligation — Is the client obliged to offer work, and are you
obliged to accept it? If yes, this points toward inside IR35.
Who determines IR35 status?
Since April 2021, medium and large private sector clients determine IR35 status (not
the contractor). Small companies (fewer than 50 employees, turnover under £10.2m,
balance sheet under £5.1m) are exempt — in those cases, the contractor assesses their
own status.
The official tool for assessing IR35 status is HMRC’s CEST (Check Employment Status for
Tax) tool, though many contractors and their advisers dispute its accuracy.
IR35 Calculator — Frequently Asked Questions
Most contractors earn between £8,000 and £20,000 less per year inside IR35 compared
to outside IR35. On a £500/day rate working 220 days, the typical difference is
around £13,500–£14,000 per year. The gap is larger at higher day rates because more
income falls into higher tax bands. Use the calculator above to find your exact figure.
Effectively yes, from a tax perspective. Umbrella company workers pay the same
income tax and NI as inside IR35 contractors. The difference is that umbrella
companies act as your employer, giving you employment rights (statutory sick pay,
holiday pay, pension auto-enrolment). The umbrella's margin fee (typically £1,000–
£1,500/year) is the main additional cost compared to direct PAYE.
Generally no. Inside IR35, you cannot deduct most business expenses from your taxable
income the way you can outside IR35. HMRC's deemed payment calculation does allow a
5% flat-rate allowance for administrative costs (if your client is a small company
and the original IR35 rules apply), but this was removed under the 2021 Off-Payroll
rules for medium and large clients.
The financial take-home is almost identical — both treat your income as employment
income subject to PAYE tax and NI. The main practical differences are: (1) inside IR35
you still operate via your limited company and need to handle the deemed payment
calculation, whereas PAYE is handled directly by the client's payroll; (2) inside IR35
you may still have some limited company expenses and pension flexibility; (3) PAYE
contractors accumulate employment rights with the client.
Inside IR35, your deemed salary is calculated as: gross contract income minus employer
NI minus the 5% allowance (where applicable). On this deemed salary, employee NI and
income tax are charged at standard employment rates. Outside IR35, you pay corporation
tax on company profits (19% up to £50,000) and dividend tax on distributions (8.75%
basic rate, 33.75% higher rate), after taking a salary equal to the Personal Allowance.
This calculator is built for the 2025/26 tax year. For the 2026/27 tax year (from
April 2026), key changes include an increase in dividend tax rates of 2 percentage
points across all bands. We will update the calculator when the 2026/27 rates are
confirmed. For planning purposes, assume your outside IR35 take-home will reduce
slightly from April 2026.
Scottish taxpayers face different income tax bands and rates set by the Scottish
Parliament. This calculator uses England, Wales, and Northern Ireland rates. Scottish
contractors should note their effective tax rates may differ — especially for income
in the £43,663–£50,270 band where Scottish higher rate (42%) diverges from the UK
basic rate (20%).
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