UK IR35 Status Take-Home Calculator (2025/26)

Worked example

How the inside vs outside IR35 gap actually works in 2025/26

IR35 (the off-payroll rules) does not tax your day rate directly. If a role is inside IR35, the fee-payer treats your assignment rate as an employment cost, so it first carves out employer National Insurance at 15% on pay above the £5,000 secondary threshold and, where the agency or umbrella is large enough, the 0.5% apprenticeship levy. Only what is left becomes your deemed gross pay, and that is then hit with PAYE income tax and employee NI (8% up to £50,270, then 2%). This is why an inside rate feels punishing: you shoulder taxes an ordinary employee never sees on their gross.

If the same role is outside IR35, you invoice through your own limited company. The company pays a small salary, pays 19% to 26.5% corporation tax on its profit, and the rest comes out as dividends taxed at 8.75%/33.75%/39.35% with a £500 allowance. There is no employee or employer NI on dividends. That structural difference, not any single rate, is what creates the take-home gap this calculator quantifies.

Why the 2025/26 changes shrank the outside advantage

Two changes for 2025/26 matter for this comparison. First, the employer NI secondary threshold dropped to £5,000 (from £9,100) and the rate rose to 15%. That raises the employer NI deducted on inside contracts, but it also raises employer NI on your outside salary if you pay yourself £12,570, so it bites both sides. Second, corporation tax stays at 19% up to £50,000 and 25% above £250,000, with a 26.5% effective marginal rate in between where most single-contractor profits land.

Because dividends are paid from profit that has already been taxed at roughly a quarter, and because employee NI is only 8%, the classic 'outside is far better' picture is less dramatic than it was a few years ago. The calculator shows a genuine but moderate gap at mid-range rates, which is exactly the number you should be negotiating over rather than a rule of thumb.

What the calculator assumes and where your real figure will differ

To keep the comparison clean, the base outside IR35 model assumes a tax-efficient director salary (£12,570 or £5,000), all remaining profit taken as dividends, and no other expenses, pension contributions or VAT. Real limited-company contractors usually do better than the figure shown, because employer pension contributions are a corporation-tax-deductible way to extract cash with no income tax or NI, and legitimate business costs reduce taxable profit. A single-director company also cannot claim the £10,500 Employment Allowance, so employer NI on a £12,570 salary is not refunded, which is why the £5,000 salary option exists.

The inside model assumes the apprenticeship levy is passed on (true for most agencies and umbrellas above the £3m pay-bill threshold) and ignores any umbrella margin, which would reduce the inside figure a little further. It also assumes you take the full deemed payment as pay in the year.

Scotland, high rates and the personal allowance trap

If you are a Scottish taxpayer, income tax on your salary and on inside-IR35 deemed pay uses the Scottish bands (19% to 48%), which push inside take-home lower at higher rates than the rest of the UK. National Insurance and dividend tax are UK-wide, so only the employment-income side changes. Select your region so the calculator applies the right bands.

Watch the £100,000 personal allowance taper: for every £2 of income above £100,000, you lose £1 of allowance, creating a 60% effective marginal rate (61.5% in Scotland) between £100,000 and £125,140. High day rates can drag inside-IR35 deemed pay into this zone, and outside contractors often deliberately leave profit in the company or divert it to a pension to stay under £100,000. The calculator reflects the taper automatically so you can see the effect at your rate.

Frequently asked questions