UK IR35 Inside vs Outside Pay Calculator
Compare net take-home pay between Inside IR35 umbrella contracts and Outside IR35 Ltd companies. Get a clear breakdown of tax, NI, and umbrella fees.
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Calculation Methodology & Statutory Rules
Outside IR35 (PSC): Director Salary £12,570 (uses Personal Allowance, no Employee NI).
Corporation Tax 19% on profits up to £50k, 25% over £250k, with Marginal Relief between £50k-£250k.
Dividend allowance £500, with dividend tax at 8.75% basic, 33.75% higher, and 39.35% additional rate.
Inside IR35 (Umbrella): Deducts Umbrella fee, Employer NI (13.8% above £9,100), and Apprenticeship Levy (0.5%) from gross rate before calculating employee PAYE income tax and Employee NI (8%/2%).
Frequently Asked Questions
Q1.What is IR35 and how does it affect contractors?
IR35 (the 'Off-Payroll Working Rules') is UK tax legislation designed to prevent contractors from avoiding income tax and National Insurance by operating through a Personal Service Company (PSC). If HMRC determines your contract is 'inside IR35', you are treated as a deemed employee — paying Income Tax and NICs via PAYE just like an employee. If you are 'outside IR35', you run a Ltd company, pay yourself an optimal salary and dividends, resulting in higher net take-home pay.
Q2.What is the Corporation Tax rate for a PSC in 2026/27?
Corporation Tax for 2026/27 is 19% on profits up to £50,000, and 25% on profits above £250,000. For profits between £50,000 and £250,000, Marginal Relief applies, creating an effective rate that tapers from 19% to 25%. The optimal director salary for a PSC is £12,570 (equal to the Personal Allowance) as it triggers no Income Tax and no Employee NI, while maintaining State Pension credits.
Q3.What is the dividend allowance and dividend tax rates for 2026/27?
The dividend allowance for 2026/27 is £500 — dividends up to this amount are tax-free. Above the allowance, dividend tax rates are 8.75% (Basic Rate band), 33.75% (Higher Rate band), and 39.35% (Additional Rate for income above £125,140).
Q4.What are the Employer NI and Apprenticeship Levy rates in 2026/27?
Under inside IR35 (umbrella company), Employer's National Insurance is 13.8% on earnings above the Secondary Threshold (£9,100/year). The Apprenticeship Levy adds a further 0.5% of total gross wage. These employer costs are deducted from your gross assignment fee before paying your employee salary.
Disclaimer: Results are estimates based on standard tax rules for the 2026 tax year and are provided for informational purposes only. Individual circumstances (deductions, credits, specific state/local rules) may significantly affect your actual tax liability. Always consult a qualified tax professional or accountant for advice specific to your situation.