IR35 calculator (2025/26 & 2026/27):
Inside vs outside take-home pay

A common situation for NHS, banking, and government IT contractors. Being pushed inside IR35 costs this contractor the equivalent of a 23% pay cut compared to a legitimate outside IR35 engagement. To break even inside IR35, they'd need a day rate uplift of approximately £70/day. See full take-home table at every day rate →

At higher day rates, the inside IR35 penalty is more severe in absolute terms because more income falls in the 40% tax band as a deemed employee. Many contractors at this level negotiate a rate uplift, use IR35 insurance, or restructure through compliant outside-IR35 arrangements. From April 2026, the small company threshold changes may open new options — check if your client qualifies →

This is the most common entry point for new contractors. Even working more days (240 vs 220), the umbrella contractor takes home significantly less — primarily because employer NI is deducted from their assignment rate before PAYE. From April 2026, the agency becomes responsible for operating PAYE on umbrella workers directly, but the tax cost remains the same. Use the Umbrella Company tab to model your own numbers.

Your day rate is treated as a deemed salary. The calculation deducts employer National Insurance (15% above the £5,000 secondary threshold) from your gross contract value first — this is a cost borne by your limited company, not deducted from PAYE. The remainder is subject to Income Tax and employee NI (8% up to £50,270, 2% above).

Source: HMRC NI rates · HMRC Income Tax rates

You pay yourself a small salary — the calculator defaults to £9,100 (just below the employer NI secondary threshold, eliminating employer NI entirely) and extracts remaining profit as dividends. Some accountants instead recommend £12,570 (the personal allowance) to use all tax-free income but accepting a small employer NI cost — the optimal choice depends on your profit level. Corporation Tax uses marginal relief (19–25% between £50k–£250k). Dividend tax applies the £500 allowance then the relevant rate.

Source: HMRC Corp Tax rates · HMRC Dividend Tax

Umbrella calculations start from your assignment rate, deduct employer NI and the umbrella margin, then apply full PAYE (Income Tax + employee NI) to the resulting gross. From April 2026, agencies must apply PAYE directly to umbrella workers under new legislation — our model reflects this structure.

Source: HMRC Umbrella reform guidance

The calculator assumes standard England/Wales rates, one source of income, and a standard salary/dividend split. It doesn't account for: pension contributions, business expenses, student loan repayments, Scottish tax rates, the high-income child benefit charge, or complex shareholding structures. For a precise figure, consult a specialist contractor accountant.