IR35 Tax Calculator UK 2025/26

IR35 tax calculator UK 2025/26 — compare inside vs outside IR35 take-home for contractors. Off-payroll working rules, de

Quick answer: On a £500/day contract (220 days = £110,000/year): Inside IR35 take-home ≈ £64,000 after deemed PAYE; outside IR35 take-home ≈ £82,000 via Ltd Co salary + dividends. The IR35 status determines £18,000+/year difference.
Mustafa Bilgic
Reviewed by Mustafa Bilgic · UK Calculator Editor ·

Calculator

IR35 (or "off-payroll working rules") determines whether HMRC treats you as an employee for tax purposes. Inside IR35 = full PAYE on day rate; outside = Ltd Co salary + dividends. This calculator computes both scenarios so you can see the cash impact.

How ir35 tax calculator works in 2025/26

From April 2021, medium and large clients (or any public sector body) determine your IR35 status — not you. Small clients (≤£10.2M turnover, ≤50 employees, ≤£5.1M balance sheet) are exempt; you self-determine.

Inside IR35 deemed payment calculation:

  1. Gross day rate × days × weeks = invoice value
  2. Subtract 5% allowable expenses (only if Ltd Co intermediary, not umbrella)
  3. Subtract employer NI 13.8% on amount above £9,100
  4. Apply employee PAYE (income tax + NI) to remainder

Outside IR35 via Ltd Co:

  • Pay yourself optimal salary £12,570 (full PA + NI credit) or £9,100 (no NI)
  • Corporation tax 19% (≤£50k profit) or 25% (≥£250k) on remaining profit
  • Take dividends after corporation tax — taxed at 8.75/33.75/39.35%

Worked example: £500/day, 220 days, inside IR35 via umbrella

Gross £110k. Umbrella margin £25/wk (52 weeks) = £1,300. Employer NI = (108,700-9,100) × 13.8% = £13,745. Deemed payment £94,955. PAYE: tax £20,963, NI £4,909. Take-home £69,083.

Gross: £110,000 → Take-home: £69,083.00/year (£5,756.92/month)

Worked example: £500/day, 220 days, outside IR35 Ltd Co

Salary £12,570 (uses PA, no NI), Ltd Co profit £97,430. Corp tax @25% (over £50k) = £24,358 (with marginal relief actually less). Available dividends ≈£73,072. Personal: £500 dividend allowance + £37,200 basic rate × 8.75% = £3,255 + remaining at 33.75%. Total take-home ≈ £82k.

Gross: £110,000 → Take-home: £82,000.00/year (£6,833.33/month)

Worked example: £300/day inside IR35 entry contractor

£66k gross. Umbrella + employer NI deductions ≈£11k. Deemed payment £55k. PAYE ≈£11k. Take-home £44k.

Gross: £66,000 → Take-home: £44,000.00/year (£3,666.67/month)

Frequently asked questions

Who decides if I'm inside or outside IR35?
For medium/large private sector clients and ALL public sector clients, the END-CLIENT determines status (since April 2021). For small private sector clients (<£10.2M turnover, <50 employees), the contractor self-determines.
What does "inside IR35" mean for take-home?
Inside IR35 means HMRC treats you as an employee for tax. Your day rate gets full PAYE deduction (income tax + employee NI + employer NI passed back through umbrella/fee-payer). Take-home is typically 60-70% of contract value.
Can I challenge an IR35 status determination?
Yes — Status Determination Statement (SDS) must be issued; you can dispute via the client-led disagreement process (45 days). HMRC also publishes CEST (Check Employment Status for Tax) tool for indicative status.
What's the difference between umbrella and Ltd Co for inside IR35?
Umbrella: agency-employed, no Ltd Co overhead, fixed weekly margin (£20-30). Ltd Co with deemed payment: keep your Ltd Co for outside-IR35 work, pay employer NI from inside-IR35 fees. Most contractors switch to umbrella for inside contracts.
Are pension contributions still allowed inside IR35?
Yes — salary sacrifice into a pension is a legal way to reduce taxable deemed payment. Up to £60,000/year (Annual Allowance) can be sacrificed, saving 32-47% in income tax + NI.
Does outside IR35 via Ltd Co still work in 2025/26?
Yes for genuinely independent contractors with multiple clients, no integration into client's business, and right of substitution. Be aware: HMRC has stepped up CEST audits and IR35 enquiries — keep evidence (SDS, contract terms, working practices).
How does IR35 affect my pension?
Inside IR35: PAYE-style pension contributions (5% employee minimum auto-enrolment via umbrella). Outside IR35: Ltd Co employer contributions are corporation tax-deductible — most efficient route for contractors.

Official UK Sources

Last reviewed: May 2026 against HMRC 2025/26 rates.

Related Calculators

Salary Calculator | Tax Calculator | National Insurance Calculator | Pension Calculator | Vat Calculator