IR35 Calculator 2026/27
At £300 per day over 230 days (£69,000 gross), inside IR35 take-home is about £47,500 versus £54,000 outside via a limited company, roughly £6,500 less. For 2026/27, dividend tax rises to 10.75% basic and 35.75% higher, slightly narrowing the outside-IR35 gap. Enter your day rate below.
Source: HMRC off-payroll working (IR35). Supports the deemed employment payment steps.
Calculator
Annual Gross Income: £115,000
Inside IR35
£70,172
29.6% effective tax rate
Outside IR35 (Ltd)
£69,179
35.5% effective tax rate
Outside IR35 pays less by £993 per year
Full Tax Breakdown
| Inside IR35 | Outside IR35 (Ltd) | |
|---|---|---|
| Gross income | £115,000 | £115,000 |
| Allowable expenses | £5,750 | £5,000 |
| Director salary (outside) | - | £5,000 |
| Corporation tax | - | £24,075 |
| Income tax | £29,982 | £0 |
| Employee NI | £4,096 | £0 |
| Dividend tax | - | £16,746 |
| Total tax & NI | £34,078 | £40,821 |
| Annual take-home | £70,172 | £69,179 |
Outside IR35 Assumptions
- Optimal director salary: £5,000/year (NI secondary threshold - no employee or employer NI)
- All remaining post-corp-tax profit extracted as dividends
- Dividend allowance: £500. Basic rate dividend tax: 10.75%
- No employer NI on salary below secondary threshold (£5,000)
Important: This calculator shows the tax difference between IR35 statuses. Tax savings are only available if you genuinely operate outside IR35. Incorrectly claiming outside IR35 status can result in significant HMRC penalties. Always assess your status carefully using HMRC's CEST tool and seek professional advice.
HMRC's CEST tool is not always accurate. Consider a specialist IR35 review (QDOS, IR35 Shield, etc.) for a more reliable determination and insurance cover.
IR35 is determined by how you work, not your contract alone. Key factors: control, substitution rights, mutuality of obligation. Working from home, using your own equipment, and being able to send a substitute all support outside IR35.
These insights are generated based on your inputs and general UK financial guidelines. They do not constitute personal financial advice. Always consult a qualified accountant or FCA-regulated adviser before making financial decisions.
What this calculation assumes
Calculators model a full tax or contract year in one step. Money is carried at full precision through the calculation and rounded once for display, to the penny for exact amounts and to the nearest pound where a figure is labelled an estimate.
- Pay-period rounding in real payroll can make the yearly total differ by a small amount
- Monthly figures are an annual result divided by twelve, not a payroll month
- A part-year start or leaver date is not modelled unless the page offers it
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How IR35 Calculator 2026/27 Works
Inside IR35 Calculation
When you are inside IR35, your income is treated as employment income. HMRC allows a deemed 5% allowable expense deduction to cover the costs of running your company, plus any genuine business expenses. The remaining income is subject to income tax (20%, 40%, or 45%) and employee Class 1 National Insurance (8% up to £50,270; 2% above). This calculator applies the 5% deemed expense and any additional expenses you specify.
Outside IR35: Ltd Company Calculation
Outside IR35, you operate via a limited company. The most tax-efficient structure for 2026/27 is: pay yourself a salary of £5,000 (the NI secondary threshold) - this is below the income tax personal allowance and avoids both employee and employer National Insurance while still counting as a qualifying year for state pension. Company profits after corporation tax (19 to 25%) are distributed as dividends. The first £500 of dividends is tax-free; beyond that, dividend tax is 10.75% (basic rate), 35.75% (higher rate), or 39.35% (additional rate). The 2 percentage point increase in basic and higher dividend rates from April 2026 narrows the outside IR35 advantage slightly compared to 2025/26.
Allowable Expenses
Genuine business expenses reduce your taxable profit. Common allowable expenses include professional indemnity and other insurance, accountancy fees, equipment and software, training courses directly related to your work, and home office costs. Personal expenses are not allowable. The calculator uses your stated expenses for the outside-IR35 scenario.
Interpreting the Results
The difference shown is the annual cost of being inside vs outside IR35. However, outside IR35 benefits are only available if you genuinely meet the outside-IR35 criteria. Incorrectly claiming outside IR35 status carries substantial risk of HMRC investigation and backdated tax plus penalties.
Frequently Asked Questions
IR35 (officially the 'off-payroll working rules') is UK tax legislation designed to prevent tax avoidance by workers who supply their services via an intermediary (usually a personal service company / limited company) but are effectively working as employees. If you are 'inside IR35', you pay income tax and NI as though you were employed. If you are 'outside IR35', you can pay yourself an optimal salary and dividends via your limited company, which is typically more tax-efficient.
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.
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IR35 Explained: Inside vs Outside and What It Means for Your Take-Home Pay
The off-payroll working rules catch more contractors every year. We explain how to assess IR35 status and what the tax difference is.
Read guideCorporation Tax Rates 2026/27: Small Profits, Main Rate and Marginal Relief
Most company directors set their salary at the Secondary NI Threshold. Here's the optimal salary and dividend split for 2026/27.
Read guideIR35 Contractor Survival Kit
A comprehensive guide to IR35 status assessment, contract review checklist, inside vs outside tax modelling, and working practices documentation templates.
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Sources and method
- HMRC off-payroll working (IR35) (HM Revenue & Customs). Supports: The deemed employment payment steps. United Kingdom, Current guidance.
- HMRC Income Tax rates and allowances (HM Revenue & Customs). Supports: Income tax on the deemed payment. England and Wales, 2026/27 tax year. Source checked on .
- HMRC National Insurance rates and categories (HM Revenue & Customs). Supports: National Insurance on the deemed payment. United Kingdom, 2026/27 tax year. Source checked on .
Method: Annual estimates and rounding.
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Further reading
Background references used while writing this page. The sources behind the calculated figures are listed above.
Disclaimer: This calculator provides estimates based on standard HMRC rates for 2026/27. Results may vary based on individual circumstances. This is not financial advice. Always consult a qualified accountant or CIMA-qualified financial adviser for personal tax matters.