What is the difference in take-home pay between inside and outside IR35?

Typically, your take-home pay is significantly lower inside IR35. This is because your income is treated as a deemed payment, subjecting it to standard PAYE income tax and both Employee and Employer National Insurance contributions before it reaches your company account. Outside IR35, you can utilize a more tax-efficient mix of salary and dividends.

Can I use this calculator to negotiate my inside IR35 day rate?

Yes. Many contractors use this comparison to calculate the 'uplift' they need. By entering your outside IR35 rate, you can see the net income drop, and then adjust the inside IR35 day rate upwards until the net monthly income matches your outside IR35 expectations.

Why am I paying Employer's National Insurance inside IR35?

Under the off-payroll working rules, the fee-payer (usually your agency or end-client) is responsible for paying Employer's NICs. However, because employment taxes cannot be legally deducted from a contractor's agreed rate, the rate offered for inside IR35 roles is typically adjusted downwards by the agency beforehand to cover this 15% cost.

Does the 5% IR35 allowance still apply?

For most contractors, no. The 5% flat rate allowance for administrative expenses only applies if you are working for a 'small' private sector client where you still determine your own IR35 status under the old Chapter 8 rules. Our calculator allows you to toggle this on or off depending on your client.

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IR35 Deemed Payment Comparison Calculator

IR35 Deemed Payment Comparison Calculator

Comparing business structures instead? If you are looking to compare working through an Umbrella Company versus setting up a standard Limited Company, please use our dedicated Umbrella vs Limited Company Calculator.

Use our IR35 deemed payment comparison calculator to compare estimated annual income, monthly take-home pay and tax deductions under deemed payment and standard limited company contractor arrangements.

If you are working through a limited company, and your contract falls inside IR35, part of your limited company income is treated as a deemed payment for tax purposes. This means Income Tax and National Insurance contributions are applied in a similar way to employment income, which can significantly reduce your take-home pay.

Our calculator estimates your potential tax liabilities and take-home pay if your contract falls inside IR35 and deemed payment rules apply. It is designed for limited company contractors who want to assess the financial impact of IR35 using the latest 2026/27 tax rates and thresholds.

Calculations last reviewed: May 2026

Rate Type:

Daily Rate Hourly Rate

Daily Rate (£):

Annual Business Expenses (£): Annual Pension Contributions (£): Annual Gross Salary (£): Apply 5% Admin Allowance (Inside IR35)? Only applicable if end-client is a 'small' business.

No (Standard) Yes (Small Client)

⚠️ Warning: Your business expenses exceed your turnover resulting in a loss before tax.

RESULTS SUMMARY

Comparison of your take-home pay inside (deemed payment) vs outside IR35 (2026/27 Tax Year)

OUTSIDE IR35

Annual Net Income

£0.00

↑ More take-home pay

INSIDE (DEEMED)

Annual Net Income

£0.00

↓ Less take-home pay

DIFFERENCE

You're better off by

£0.00

↑ 0.00% more

SUMMARY	OUTSIDE IR35	INSIDE IR35 (DEEMED)	DIFFERENCE
Personal Taxes	£0.00	£0.00	£0.00
Corporation Tax	£0.00	N/A	£0.00
Employer's NIC	£0.00	£0.00	£0.00
Total Taxes	£0.00	£0.00	£0.00
Annual Net Income	£0.00	£0.00	£0.00
Monthly Net Income	£0.00	£0.00	£0.00
Tax % of Revenue	0.00%	0.00%	0.00%

OUTSIDE IR35 IS MORE TAX-EFFICIENT

You keep £0.00 more per year (£0.00 more per month) by working outside IR35.

Calculation Assumptions (2026/27 Tax Year)

Working Weeks: Annual turnover assumes 44 working weeks per year, allowing for 8 weeks of holidays, bank holidays, and void periods.
Working Hours: Hourly rate calculations assume a standard 37.5-hour working week.
Employer's NIC: Reflects the updated 15% Employer's National Insurance rate with a £5,000 threshold.
Outside IR35 (Corporation Tax): Applies the 19% small profits rate up to £50,000, tapering with Marginal Relief up to the 25% main rate at £250,000.
Outside IR35 (Dividends): Assumes a Dividend Tax Allowance of £500.
Inside IR35 (5% Allowance): The 5% flat rate allowance is optional. Under current rules, it generally only applies if your end-client is classed as a 'small' business.
Personal Allowance: Assumes a standard Personal Allowance of £12,570, tapering down by £1 for every £2 earned above £100,000.

Note: We regularly review and refine this calculator to keep it aligned with current UK tax rules and real-world contractor scenarios. If you have any feedback, spot something that could be improved, or would like to suggest an enhancement, please feel free to get in touch with us.

Related Contractor Calculators

Outside IR35 Calculator

Just want to see your standard limited company take-home pay? Use our dedicated Outside IR35 tool.

Try this calculator

Umbrella vs Limited Calculator

Comparing business structures? Use our tool to see the difference between standard PAYE umbrella and limited company contracting.

Try this calculator

Calculation Example

Calculator Inputs Day rate: £200
Billable days: 220
Total revenue = £44,000

Annual Expenses: £10,000
Pension Contributions: £3,000
Annual Gross Salary: £20,000

This example shows exactly how the calculator arrives at each number. Click the “See how this was worked out” links under each line for the step-by-step calculation.

Results Summary	Deemed Payment	Outside IR35	Difference
Personal Taxes See how this was worked out Inside: Based on £20,000 salary → after £12,570 allowance, £7,430 is taxable → Income tax + employee NIC = £3,675.18. Outside: Salary + dividend mix taxed → total personal taxes = £2,656.81.	£3,675.18	£2,656.81	£-1,018.38
Corporation Tax See how this was worked out Inside: All income taxed as employment → no company profit left → not applicable. Outside: Company profit after expenses/pension → corporation tax at 19% = £1,662.50.	N/A	£1,662.50	£1,662.50
Employer's NIC See how this was worked out Inside: Employer’s NIC due on £20,000 salary → £3,104.35. Outside: Employer’s NIC calculated differently → £2,250.00.	£3,104.35	£2,250.00	£-854.35
Total Taxes See how this was worked out Inside: Personal tax (£3,675.18) + Employer’s NIC (£3,104.35) = £6,779.53. Outside: Personal tax (£2,656.81) + Corporation tax (£1,662.50) + Employer’s NIC (£2,250.00) = £6,569.31.	£6,779.53	£6,569.31	£-210.22
Annual Net Income See how this was worked out Inside: After all taxes and NIC → take-home = £22,020.47. Outside: After corporation tax, personal tax and NIC → take-home = £24,430.69. Difference: Outside gives £2,410.22 more.	£22,020.47	£24,430.69	£2,410.22
Monthly Net Income See how this was worked out Annual net income ÷ 12 months. Inside: £22,020.47 ÷ 12 = £1,835.04. Outside: £24,430.69 ÷ 12 = £2,035.89.	£1,835.04	£2,035.89	£200.85
Tax % of Revenue See how this was worked out Total taxes ÷ £44,000 revenue × 100. Inside: £6,779.53 ÷ £44,000 = 15.41%. Outside: £6,569.31 ÷ £44,000 = 14.93%.	15.41%	14.93%	-0.48%

Understanding Deemed Payments vs Outside IR35

When a contract is determined to be Inside IR35, but you continue to operate through your own Limited Company (rather than an Umbrella), your income is processed as a Deemed Payment.

The Goal of this Calculator: This tool is designed to provide 100% transparency on the "net" impact of an IR35 determination. It helps you calculate the financial gap between a standard business-to-business engagement (Outside) and an employment-style tax treatment (Inside).

Who benefits from using this?

This comparison is essential for Limited Company contractors who need to:

Negotiate Rate Uplifts: Determine exactly how much to increase your daily rate to offset the tax hit of an "Inside" determination.
Assess Contract Offers: Compare the true value of an "Inside" vs "Outside" role before signing.
Financial Transparency: Understand exactly how much Employer NI and PAYE tax will be deducted from your assignment rate.

What has changed in the 2026/27 tax year?

For the 2026/27 tax year, there have been no structural changes to IR35 legislation itself. The off-payroll working rules remain unchanged, and your IR35 status is still determined based on factors such as control, substitution, and mutuality of obligation.

However, we have included the latest tax updates in this calculator, including the increase in dividend tax rates from 6 April 2026. These changes directly affect contractors operating outside IR35 who extract income through dividends.

As a result, the gap in take-home pay between inside and outside IR35 scenarios has narrowed compared to previous years. While operating outside IR35 can still be more tax-efficient in many cases, the overall advantage is now more limited than it once was.

This calculator reflects the latest 2026/27 tax rules to provide an accurate comparison of your net income under both scenarios.

Calculations Reviewed by ✔ Verified

Nikunja Shah

Xero Advisor Certified | ACCA Part-Qualified Accountant

Calculations on this page have been reviewed and verified to ensure accuracy and alignment with current UK tax regulations for the 2026/27 tax year.

Last reviewed: April 2026

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Disclaimer: This IR35 comparison calculator is provided for illustrative purposes only and does not constitute financial, tax, or legal advice. It assumes a standard working pattern and does not account for specific tax codes, student loans, or complex financial arrangements. Always consult a qualified accountant to review your specific IR35 status and tax liabilities.