IR35 Calculator 2026/27

Inside IR35: your income is treated as employment income. Your client deducts PAYE and NI before paying you, or you calculate these via your limited company and pay them to HMRC. You cannot extract profits as dividends. Outside IR35: you are treated as genuinely self-employed. You pay yourself an optimal salary (usually at the NI secondary threshold), pay corporation tax on company profits, and take remaining profits as dividends - which are taxed at lower dividend rates than income tax.

HMRC uses three primary tests: (1) Substitution - can you send a substitute to do the work in your place? (2) Control - does the client control how, when, and where you work? (3) Mutuality of obligation - are both parties obliged to offer and accept work? Genuine outside-IR35 contractors typically have substitution rights, limited client control, and no obligation to accept work. HMRC's free CEST (Check Employment Status for Tax) tool gives a determination, though it's not always correct in complex cases.

CEST (Check Employment Status for Tax) is HMRC's online tool for assessing IR35 status. HMRC will stand behind a CEST determination if you answer the questions accurately. However, CEST has been criticised for not covering all scenarios - particularly around mutuality of obligation - and has been challenged in tribunal. For important decisions, professional advice from an IR35 specialist is recommended alongside CEST.

Since April 2021, medium and large private sector businesses are responsible for determining the IR35 status of contractors they engage. Small companies (under 50 employees, under £10.2m turnover, under £5.1m balance sheet) are exempt and the contractor's company makes the determination. In the public sector, the client has always been responsible for IR35 determinations since 2017.

Key contractual clauses that support outside IR35 status include: an unfettered right of substitution (you can send a qualified substitute without needing client approval); no obligation for the client to offer work; no obligation for you to accept work; the right to work for other clients simultaneously; payment for output/deliverables rather than time; no access to employee benefits; using your own equipment. However, courts look at working practices in reality - a contract alone does not determine IR35 status.

The substitution test asks whether you have an unfettered right to send a substitute to perform the services in your place, and whether this right has ever been exercised. A genuine right of substitution is strong evidence of being outside IR35, as employees cannot send substitutes to do their job. The substitution must be practical (the substitute must be able to do the work) and unfettered (the client cannot refuse without good reason). A clause that is 'subject to client approval' is generally not considered a genuine right of substitution.