IR35 calculator
Put in a day rate and see what you keep inside IR35 and outside it, on 2026/27 rates. The number most contractors want is the last one: the rate an inside contract has to pay before you are no worse off.
Outside IR35
£69,365
£5,780 a month, keeping 63%
Inside IR35
£65,595
£5,466 a month, keeping 60%
Cost of being inside
£3,771 a year
£17 of every day you bill
What an inside contract has to pay to match
To take home the same £69,365 through an umbrella, an inside IR35 assignment has to pay £537.98 a day, which is 7.6% more than £500. Use that as your floor when a client moves a role inside.
2026/27 rates for England, Wales and Northern Ireland. An estimate, not tax advice. It assumes the day rate is the assignment rate the agency pays the umbrella, that you draw all profit as dividends, that you have no other income, and that you are not repaying a student loan. What the assumptions mean.
How the two routes are taxed
Outside IR35 you invoice through your own limited company. The company pays corporation tax on its profit, and you take money out as a small salary plus dividends. Nobody pays National Insurance on a dividend, which is where most of the advantage has always come from.
Inside IR35 the work is treated as employment for tax. In practice that means an umbrella company employs you, receives the assignment rate from the agency, and pays employer National Insurance, the apprenticeship levy and its own margin out of that money before working out your gross pay. Income tax and employee National Insurance then come off the gross in the normal way.
The two are close together now, and that surprises people. Three changes did it: corporation tax rising to 25 per cent with an effective 26.5 per cent on profits between £50,000 and £250,000, employer National Insurance rising to 15 per cent on everything above £5,000, and dividend tax rising again in April 2026 to 10.75 per cent at basic rate and 35.75 per cent at higher rate. The old rule that you should add 20 to 25 per cent to an inside rate was written when dividends were taxed at 7.5 per cent. It is out of date, and quoting it in a negotiation now makes you easy to dismiss.
What the calculator assumes
- The day rate is the assignment rate inside IR35, so the umbrella takes employer costs out of it. If an agency quotes you a PAYE rate instead, those costs sit on top and the inside figure is better than shown.
- You draw every pound of company profit as dividends in the same year. Leaving profit in the company, or closing it and claiming Business Asset Disposal Relief, changes the picture.
- A £12,570 director's salary, which uses the personal allowance without triggering income tax. It costs the company £1,135.50 in employer National Insurance, and saves more than that in corporation tax.
- No other income, no student loan repayments, and England, Wales or Northern Ireland tax bands. Scotland has its own, and they are higher above £31,092.
- No employment allowance, because a company whose only employee is its sole director cannot claim it.
Things the numbers do not show
Take-home is not the whole comparison. Inside IR35 through an umbrella you get holiday pay, sick pay, a workplace pension and employment rights, and no company accounts to file. Outside IR35 you carry the admin and the risk of an HMRC status enquiry, but you keep control of when you take money out, which is worth real money across a year when your work is lumpy.
Holiday pay deserves a word, because it causes more arguments than anything else on an umbrella payslip. The 12.07 per cent you see is not an extra: it is part of the gross the umbrella already holds for you. Over a full year it makes no difference to the totals here. It only matters whether you get it rolled up each week or held back until you take leave, and you are entitled to ask for it either way.
Questions contractors ask
How much less do you take home inside IR35?
On a £500 day rate the difference is a few thousand pounds a year, not the 20 to 25 per cent that older guides quote. The gap has narrowed because corporation tax rose to 25 per cent with a 26.5 per cent marginal band, employer National Insurance rose to 15 per cent, and dividend tax went up again in April 2026. Put your own rate into the calculator, because the gap changes a lot with the size of the rate.
Why is employer National Insurance taken out of my rate inside IR35?
Because the rate an agency quotes for an inside IR35 role is usually the assignment rate: the amount it pays the umbrella company, out of which the umbrella has to fund employer National Insurance at 15 per cent, the apprenticeship levy at 0.5 per cent and its own margin before there is any gross pay to tax. It is legal and normal, but it means your gross pay is well below the headline rate.
What rate should I ask for if a contract moves inside IR35?
Enough to leave your take-home unchanged. The calculator works this out for you: it finds the inside day rate that produces the same net pay as your current outside rate, so you can go into the conversation with a floor rather than a guess.
Does a pension change the answer?
It narrows the gap considerably. Inside IR35 a salary sacrifice pension escapes income tax, employee National Insurance and employer National Insurance, so around 57 per cent of the cost comes back to you at higher rate. Outside IR35 an employer contribution is paid before corporation tax and before dividend tax. Both are efficient, which is why contractors who are pushed inside often raise their pension contribution rather than their rate.
Is this calculator tax advice?
No. It is an estimate built from published HMRC rates for the 2026/27 tax year, and it assumes you have no other income, draw all company profit as dividends and are not repaying a student loan. Your own position will differ. Speak to an accountant before making a decision on the strength of any calculator.
Built from HMRC published rates for 2026/27, checked 1 August 2026. An estimate for comparison, not tax advice.