IR35 Calculator UK

What Is IR35?

IR35, formally known as the off-payroll working rules, is UK tax legislation designed to identify contractors who work in a manner similar to employees but operate through an intermediary such as a limited company. If a contract is deemed to fall inside IR35, the contractor is taxed broadly in line with employment, meaning income tax and National Insurance are deducted at source.

The rules were originally introduced in 2000 and have undergone significant reform. Since April 2021, medium and large private sector clients (and all public sector clients) have been responsible for determining the IR35 status of contractors they engage. This shifted the liability away from the contractor's personal service company and onto the fee-payer in the supply chain.

The three main tests used to assess IR35 status are control (does the client dictate how, when, and where the work is done?), substitution (can the contractor send a replacement?), and mutuality of obligation (is the client obliged to offer work and the contractor obliged to accept it?). No single factor is decisive, and the assessment considers the overall picture of the working relationship.

Inside vs Outside IR35 Explained

Inside IR35 means your contract is caught by the off-payroll rules. The fee-payer deducts employer NI, income tax, and employee NI from your gross contract payments before passing the remainder to your company. In practice, you are taxed almost identically to a permanent employee, but without employment rights such as holiday pay, sick pay, or pension contributions.

Outside IR35 means you are genuinely in business on your own account. Your limited company receives the full contract rate and pays corporation tax on profits. You then take a tax-efficient mix of salary and dividends. Because dividends are not subject to National Insurance and are taxed at lower rates than salary, this typically results in significantly higher take-home pay.

The financial difference between the two can be substantial. For a contractor on £500 per day working 220 days a year, the gap can exceed £20,000 annually. This makes IR35 status one of the most consequential financial factors for UK contractors.

How This Calculator Works

This calculator models two scenarios based on your daily contract rate and working days per year. The inside IR35 calculation assumes your entire gross revenue is treated as a deemed employment payment, with employer NI deducted first and the remainder subject to income tax and employee NI. The outside IR35 calculation assumes you operate through a limited company, taking a salary at the personal allowance level and extracting remaining profits as dividends after corporation tax.

Key assumptions and limitations include: no allowable expenses are deducted (in practice, you may claim business expenses); the outside IR35 scenario uses a simplified optimal salary strategy; pension contributions, student loans, and other deductions are not included; and the corporation tax rate used is 25%. Your actual position may differ significantly depending on your individual circumstances.

Example IR35 Calculations

The following examples show the approximate impact of IR35 at three common day rates. All figures use 2025/26 rates and assume 220 working days per year.

£350 per day (£77,000 gross)

Inside IR35, your take-home pay would be approximately £51,000 per year after employer NI, income tax, and employee NI are deducted. Outside IR35, using a salary-and-dividend strategy, you could expect to take home roughly £60,000. The annual difference is around £9,000, or about £750 per month.

£500 per day (£110,000 gross)

At this rate, the inside IR35 take-home drops to approximately £66,000 after significant higher-rate tax and NI deductions. Outside IR35, you could retain around £82,000. The gap widens to roughly £16,000 per year, making IR35 status a major financial consideration.

£750 per day (£165,000 gross)

Higher day rates amplify the difference further. Inside IR35, your take-home would be approximately £91,000. Outside IR35, a salary-and-dividend approach yields around £115,000. The annual difference exceeds £24,000, though at this income level a significant portion of dividends may fall into the higher rate band.

Important: Seek Professional Advice

IR35 is one of the most complex and contested areas of UK tax law. Incorrect IR35 determinations can result in substantial tax liabilities, penalties, and interest charges — for both contractors and the businesses that engage them. This calculator provides a simplified illustration only and should not be relied upon for making financial or contractual decisions.

If you are unsure about your IR35 status, you should seek advice from a qualified accountant or tax adviser who specialises in contractor tax. Professional contract reviews, which assess the written terms and working practices of your engagement, offer a far more reliable basis for determining your status than any online tool.