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🇬🇧 UK-only · Updated for 2026/27 Tax Year

Inside vs Outside IR35 Calculator

Compare your exact take-home pay inside an Umbrella Company versus outside via a Limited Company. Updated for the new 10.75% dividend rate and 15% Employer NI.

✓New 2026 Dividend Rates✓15% Employer NI✓Corp Tax Relief✓Free — no sign-up
Inside IR35 (Umbrella)

£0.00 / mo

Retaining 0.0% of Revenue

Annual Assignment Revenue:£115000.00
Employer NI & App Levy:-£0.00
Umbrella Margin:-£920.00
Gross Salary (PAYE):£0.00
Income Tax:-£0.00
Employee NI:-£0.00
Annual Take-Home:£0.00
Outside IR35 (Ltd Co)

£0.00 / mo

Retaining 0.0% of Revenue

Annual Company Revenue:£115000.00
Business Expenses:-£2000.00
Director Salary:-£12,570.00
Taxable Company Profit:£0.00
Corporation Tax (19-25%):-£0.00
Distributable Dividends:£0.00
Dividend Tax (10.75%+):-£0.00
Annual Take-Home:£0.00
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What Is IR35 and How Does It Affect Your Take-Home Pay?

IR35 is tax legislation designed to combat "disguised employment". If HMRC determines that you are acting like a standard employee rather than an independent business, your contract will be deemed "Inside IR35".

The financial impact is massive. Inside IR35, almost your entire day rate is subjected to standard Income Tax and National Insurance, severely reducing your net pay. Outside IR35, you run a genuine business and can pay yourself through a highly tax-efficient mixture of a low salary and dividends.

The April 2026 Impact — New Dividend Rates Hit Outside IR35

For the 2026/27 tax year, the government introduced major tax hikes that impact contractors on both sides of the IR35 divide.

For those operating Outside IR35 via a Limited Company, the dividend tax rates were increased by 2%. The basic rate jumped from 8.75% to 10.75%, and the higher rate jumped from 33.75% to 35.75%. While Outside IR35 is still significantly more profitable, this tax hike narrows the gap. You can model different dividend splits using our Dividend Tax Calculator.

Inside IR35 — How Take-Home Is Calculated via Umbrella

When you accept an Inside IR35 contract, the day rate advertised is usually the "Assignment Rate". This is not your gross salary.

Before your gross salary is even calculated, the Umbrella Company must deduct Employer's National Insurance (which was increased to 15% in the latest budget), the Apprenticeship Levy (0.5%), and their own weekly margin. Only then is the remaining figure treated as your Gross Salary, which is then hit again by your personal Employee National Insurance (8%) and PAYE Income Tax. You can review umbrella margins using our Umbrella Company Checker.

Outside IR35 — Salary + Dividends via Limited Company

Operating Outside IR35 requires you to manage your own Limited Company. Your client pays the day rate directly into your business bank account. You then deduct your allowable business expenses to find your Gross Profit.

The most tax-efficient method to extract this profit in 2026/27 is to pay yourself an annual Director's Salary of £12,570. This uses up your tax-free Personal Allowance and ensures you get a qualifying year for your State Pension without paying any Income Tax or Employee NI. The remaining profit is subjected to Corporation Tax, and the rest can be drawn out as Dividends.

How Much More Do You Need to Earn Inside IR35?

A common mistake contractors make is accepting an Inside IR35 contract on the same day rate they previously charged Outside IR35.

Because of the heavy dual taxation (Employer taxes + Employee taxes) applied to umbrella workers, you typically need to negotiate a day rate that is 20% to 30% higher just to take home the same amount of cash at the end of the month. Always run the numbers through our calculator before signing a contract.

Contractor Taxes

Frequently asked questions

How much less do I take home inside IR35 vs outside?
Typically, a contractor operating inside IR35 will take home between 15% and 25% less than if they operated outside IR35 on the exact same day rate. This is due to the deduction of Employer's National Insurance, the Apprenticeship Levy, and higher Income Tax rates compared to Dividend Tax.
What is the difference between inside and outside IR35?
If your contract is 'Inside IR35', HMRC considers you an employee for tax purposes, meaning you must pay standard PAYE Income Tax and National Insurance. If your contract is 'Outside IR35', you are treated as a genuine business operating through a Limited Company, allowing you to pay yourself via a tax-efficient mix of salary and dividends.
How do the new 2026 dividend tax rates affect my contractor take-home?
From April 2026, the basic rate of dividend tax increased from 8.75% to 10.75%, and the higher rate increased from 33.75% to 35.75%. This means contractors operating Outside IR35 will pay more tax than in previous years, slightly narrowing the gap between inside and outside IR35 take-home pay.
Is an umbrella company the same as being inside IR35?
Yes, in practice. If a contract is inside IR35, recruitment agencies typically require you to use an Umbrella Company. The umbrella company becomes your legal employer, processes your timesheets, deducts all necessary taxes (including Employer NI), and pays you a net salary.
What expenses can I claim outside IR35?
When operating outside IR35 through a Limited Company, you can claim wholly and exclusively business-related expenses. Common examples include travel, accommodation, laptops, software, accountancy fees, and business insurance. These expenses reduce your Corporation Tax bill.
Has IR35 changed in 2026?
While the underlying IR35 status rules have not changed in 2026, the tax rates applied to contractors have shifted. Employer National Insurance (which affects inside IR35 umbrella rates) increased to 15%, and Dividend Tax (which affects outside IR35) increased by 2% across all bands.
What day rate do I need inside IR35 to match outside IR35 net pay?
Because of the heavy tax deductions inside IR35, you typically need to negotiate a day rate that is 20% to 30% higher than your outside IR35 rate just to break even and maintain the same monthly net take-home pay.
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