2026/27 rates · Umbrella PAYE vs Limited company · Day-rate to take-home in seconds
Default 220 ≈ 44 billable weeks
Higher earners often benefit from expanding advanced options to model expenses, pension contributions, and VAT registration.
Annual difference
£2,114 more outside IR35
That's £176 more per month, or 3.1% better take-home
Inside IR35 (Umbrella PAYE)
£68,484
annual take-home (cash + pension)
Monthly net
£5,707
After-tax day rate
£311
Gross contract value£110,000
Umbrella margin−£1,300
Pension (salary sacrifice)−£5,500
Employer NI−£12,809
Gross PAYE salary£90,391
Income tax−£23,589
Employee NI−£3,818
Student loan£0
Net take-home (cash)£62,984
Pension pot contribution£5,500
Effective deduction rate: 37.74% · 220 working days
Outside IR35 (Limited Company)
£70,599
annual take-home (cash + pension)
Monthly net
£5,883
After-tax day rate
£321
Gross contract value£110,000
Business expenses−£5,000
Pension (company contribution)−£5,500
Director salary−£12,570
Employer NI on salary−£1,136
Corporation tax−£18,986
Dividends paid£66,809
Dividend tax−£14,280
Student loan (on salary)£0
Net take-home (cash)£65,099
Pension pot contribution£5,500
Effective deduction rate: 35.82% · 220 working days
Annual take-home comparison
Assumptions used
£12,570 director salary (matches personal allowance for tax efficiency)
Standard 2026/27 tax bands and personal allowance
Corporation tax marginal relief applied for profits £50k–£250k
Corporation tax uses HMRC's official marginal relief formula (fraction 3/200) — produces slightly higher tax than simpler interpolation models used by some competitor calculators.
Dividend allowance £500 (2026/27)
Employer NI 15% above £5,000 (umbrella scenario only)
Pension contributions modelled as company contributions (outside IR35) or salary sacrifice (inside IR35) for tax efficiency
Student loan applies to salary only, not dividends
VAT FRS surplus modelled at 14.5% rate for professional services if VAT registered
Apprenticeship levy not modelled (only applies to employers with >£3m payroll)
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What is IR35 and why does it matter for contractors?
IR35 — officially the "off-payroll working rules" — is HMRC's framework for deciding whether a contractor working through their own limited company is genuinely self-employed or is effectively a "disguised employee" of the end client. Inside IR35 means HMRC views the engagement as employment: the contractor pays employed-equivalent income tax and National Insurance, with little scope for tax-efficient extraction. Outside IR35 means the contractor is genuinely running a business and can take advantage of corporate tax structures — director salary plus dividends, business expenses, employer pension contributions. Since April 2021, for most contracts with medium and large clients in the private sector (and since 2017 in the public sector), the client makes the IR35 determination, not the contractor. This calculator helps contractors understand the financial impact of either outcome — useful when negotiating day rates or weighing up two offers.
Inside IR35 vs outside IR35 — what's the take-home difference?
For a typical £500/day contract, contractors usually see £5,000–£15,000 more annual take-home outside IR35 than inside. At higher day rates the gap widens significantly. The difference comes from three structural advantages of outside-IR35 working: (a) National Insurance — outside IR35 contractors pay only minimal NI on a small director salary, while inside IR35 the worker pays full employee NI plus the umbrella absorbs employer NI from the contract value before salary is calculated; (b) corporation tax plus dividend tax is structurally lower than income tax plus NI for most income levels, even after the 2022/23 dividend tax rises; (c) outside IR35 contractors can deduct legitimate business expenses, reducing taxable profit. The gap has narrowed since dividend tax rose, but it remains substantial at higher day rates. For a fuller picture also see the salary-to-hourly calculator when comparing against an employed role offer.
When can I work outside IR35 in 2026?
Whether a contract is genuinely outside IR35 depends on working practices, not the wording in the contract. HMRC examines three pillars: substitution (can you send a substitute?), control (does the client direct how, when and where you work?), and mutuality of obligation (must they offer work and must you accept?). With small clients (turnover under £10.2m, balance sheet under £5.1m, fewer than 50 employees) the contractor still self-determines their own status. With medium and large clients in the private sector, the client makes the determination and is liable for incorrect calls. The public sector has been client-determined since 2017. Incorrect determinations create retrospective tax liability — sometimes years' worth — so always assess working practices, not just contract wording. This calculator estimates take-home for both outcomes; it does not determine IR35 status.
Calcsmith provides estimates based on the information you enter and the 2026/27 tax bands. This calculator does not determine your IR35 status — only HMRC and case law do that. Not financial advice; consult a qualified contractor accountant for your situation.