Outside IR35 Calculator

Outside IR35 means you are genuinely self-employed for tax purposes and can operate through a limited company. You pay yourself a small salary (typically £12,570) and extract remaining profits as dividends, which are taxed at lower rates than employment income. Corporation tax is paid on company profits. This structure is significantly more tax-efficient than inside IR35 or permanent employment.

The most tax-efficient salary for 2025/26 is £12,570 — equal to the personal allowance. This means no income tax on salary, minimal employee NI, and the salary is a deductible expense for corporation tax. Some advisers recommend £9,100 (NI primary threshold) to eliminate all NI, but the corporation tax saving from the higher salary usually outweighs the small NI cost.

Dividends have a £500 tax-free allowance (2025/26). Above this: 8.75% basic rate (income up to £50,270), 33.75% higher rate (£50,271–£125,140), and 39.35% additional rate (over £125,140). Dividends do not attract National Insurance, which is the key advantage over salary. The dividend tax rates are lower than equivalent income tax rates because corporation tax has already been paid on the profits.

Legitimate business expenses include: travel to client sites (if not your regular workplace), accommodation when working away, professional subscriptions, training, equipment (laptops, monitors), software, accountancy fees, insurance, phone and broadband (business proportion), and home office costs. You cannot claim commuting costs or clothing (unless specialist uniforms).

While not legally required, an accountant is strongly recommended for limited company contractors. They handle company accounts, corporation tax returns, VAT returns, and personal self-assessment. Typical costs are £100-£200/month. A good accountant will save you significantly more than their fee through tax planning, expense optimisation, and ensuring compliance.