IR35 Inside vs Outside Calculator

Enter your contract day rate (the amount billed per day, not including VAT). Enter the number of chargeable working days per year — a realistic figure for most full-year contractors is around 220–235 days after holidays, bank holidays and typical gap time between contracts.

Enter the umbrella company's weekly margin (ask your umbrella what this is before accepting). If you have a student loan, select the plan. Enter any pension contributions you want to make via salary sacrifice through the umbrella. The tool calculates inside take-home by first deducting the umbrella margin, then applying employer NI, then employee income tax and NI on the remainder.

Enter any allowable business expenses the company can legitimately deduct (accountancy fees, specialist equipment, training, professional subscriptions). Enter the annual salary you draw from the company — most outside IR35 contractors take a salary around the NI primary threshold (£12,570) to minimise NI costs. Enter any pension contributions you plan to make via the company. The tool calculates profit, Corporation Tax and the net dividend available.

The inside calculation shows: gross day-rate income minus employer NI minus umbrella margin minus employee income tax minus employee NI (minus student loan if applicable) equals inside net annual take-home. This is the clearest measure of what you actually receive each year inside IR35.

The outside calculation shows: gross revenue minus expenses minus salary cost minus employer NI on salary equals taxable company profit. After Corporation Tax (currently 19–25% depending on profit level), the net profit is distributed as dividends. Total outside take-home is the salary plus net dividends (after dividend tax at 8.75% basic, 33.75% higher or 39.35% additional rate).

The comparison shows inside take-home and outside take-home side by side. For most mid-range contractors, the outside IR35 advantage is between £5,000 and £15,000 per year, depending on day rate, expenses and whether higher-rate tax applies. Higher day rates and higher marginal tax rates widen the gap.

The break-even rate is the inside IR35 daily rate you would need to charge your client in order to take home the same amount as your current outside IR35 equivalent. Present this to a client or recruiter when an inside contract is offered: it quantifies the uplift you are asking for in a transparent, verifiable way rather than an arbitrary demand.

Scottish taxpayers pay income tax at rates and bands set by the Scottish Parliament, which differ from the rest of the UK. If you are a Scottish taxpayer (resident in Scotland), toggle the Scottish tax rates option so the inside and outside calculations reflect the bands that actually apply to you.

Since April 2017, public sector organisations (government departments, NHS, local authorities, most charities) have been responsible for determining the IR35 status of contractors they engage. Since April 2021, this "off-payroll working" rule was extended to medium and large private sector businesses. Small private sector clients (broadly, companies meeting at least two of: fewer than 50 employees, turnover under £10.2m, assets under £5.1m) are still exempt, meaning the contractor's own company makes the determination.

Even where the client determines status, a contractor can dispute a determination using a Status Determination Statement (SDS) and HMRC's Check Employment Status for Tax (CEST) tool. Blanket determinations (marking all contractors as inside without individual assessment) are not legal, though enforcement has been inconsistent.

The gap arises because inside IR35 income is taxed like employment income: employer NI at 13.8%, then employee NI at 8% (up to UEL) and income tax at 20%, 40% or 45%. Outside IR35, the company pays Corporation Tax at 19% (for profits up to £50,000) or 25% (for profits over £250,000), and the contractor then pays dividend tax at the lower rates (8.75% basic, 33.75% higher). The ability to deduct expenses from revenue before any tax is also a significant outside advantage.

For a contractor earning £600/day for 230 days, the annual gross billing is £138,000. Inside IR35, take-home after all taxes is typically around £80–85k. Outside, it might be £95–98k using efficient extraction. The gap widens at higher rates and narrows when additional rate tax applies to both inside and outside income.

HMRC's Check Employment Status for Tax (CEST) tool is the official online tool for assessing IR35 status. It asks about control, substitution, mutuality of obligation and other factors and gives a result of “employed for tax purposes” (inside IR35), “not employed for tax purposes” (outside IR35) or “CEST is unable to determine”. HMRC has stated it will stand by CEST results provided the information entered is accurate and complete.

CEST is controversial among contractors and advisers because it does not ask about all relevant legal factors and has been found to give inconsistent results on identical inputs across different versions. Many contractors use specialist IR35 review services or employment law solicitors for a second opinion, particularly on higher-value or longer engagements.