What is IR35 Inside vs Outside Calculator?
A IR35 Inside vs Outside Calculator computes ir35 inside vs outside from the inputs you provide. It applies the standard formula to the values you enter and returns the result instantly, without sending any data to a server. Day rate to take-home: PAYE + employee NI 8% + employer NI 13.8% inside vs corp tax 19%/25% + dividend tax outside.
IR35 Inside vs Outside Calculator
Compare contractor take-home inside vs outside IR35. Inside = deemed PAYE on day rate. Outside = limited company with corporation tax + dividends. 2024-25 + 2025-26 rates.
Inside IR35 = treated as a deemed employee: PAYE income tax + employee NI 8% + employer NI 13.8% all come off your day rate. Outside IR35 = your limited company pays 19% to 25% corp tax then you take a tiny salary + dividends taxed at 8.75% / 33.75% / 39.35%. Outside is typically 8% to 15% of revenue better.
Inputs
How to use it
- Enter your day rate and how many billable days you expect (typical 200 to 230 after holiday + sick).
- Add annual business expenses you’d claim through your limited company (only outside IR35 benefits).
- Set your director’s salary (outside only). Most contractors take £12,570 (the personal allowance) for tax efficiency.
- Enter any pension contribution your company pays - employer pension contributions from the company are corp-tax-deductible and avoid all NI.
- Add any other personal income (rental, other PAYE) so personal tax bands are applied accurately.
About this calculator
IR35 (originally Intermediaries Legislation, now off-payroll working) sits in Chapter 8 + Chapter 10 of ITEPA 2003. It tests whether a contractor working through a personal service company would, but for the company, be an employee. If yes ("inside IR35"), the engagement is treated as employment for tax.
Since April 2021 (private sector) and April 2017 (public sector), the responsibility to determine status moved from the contractor to the end client (if medium / large). Small private clients (turnover under £10.2m and balance sheet under £5.1m) leave the contractor responsible.
Inside IR35 means the client / agency runs PAYE on the deemed payment: gross day rate minus 5% expenses allowance (abolished for medium / large) minus pension. The deemed payment then attracts employee income tax + employee NI 8% + employer NI 13.8%. Net is paid to your limited company. The 5% expenses allowance was abolished from April 2017 for public sector and April 2021 for private sector medium/large clients.
Outside IR35 is the contractor sweet spot: limited company pays 19% to 25% corp tax on profits, you draw a tax-efficient mix of salary (up to personal allowance, free of income tax) and dividends (8.75% basic, 33.75% higher, 39.35% additional rate). Total tax is typically 8% to 15% lower than inside.
Real-world use cases
New contract decision
Recruitment agent says "inside" - check the actual financial impact at your day rate. Inside often justifies a 20% rate uplift.
Hybrid year planning
You moved mid-year between an inside contract and an outside one. Calculator shows the blended take-home position.
Negotiating day rate
Inside IR35 take-home is roughly 70% of outside at the same day rate. Use this gap to negotiate the right inside rate.
Retire-from-contracting check
Compare PAYE permanent salary equivalent. £600/day outside ~= £140k take-home; PAYE equivalent is ~£170k+.
What it handles
- 2024-25 / 2025-26 income tax bands + NI rates
- Corporation tax 19% / 25% with marginal relief
- Dividend tax bands + £500 dividend allowance
- Personal allowance taper above £100k
What it does NOT handle
- Apprenticeship Levy or Employment Allowance variations
- Tax credits / Universal Credit interactions
- Loan-charge / disguised remuneration history
- Residency or non-dom rules
Common mistakes
- Forgetting that employer NI is deducted from your day rate inside IR35.
- Believing the 5% expenses allowance still applies to large private sector clients - it does not (since April 2021).
- Taking too high a director’s salary outside IR35 (£12,570 is usually optimal, not £30k).
- Ignoring that personal allowance tapers to £0 between £100k and £125,140 of income.
Frequently asked questions
What is IR35?
IR35 (now called off-payroll working rules) tests whether a contractor working through a personal service company would, ignoring the company, be an employee of the client. Inside IR35 = treated as an employee for tax purposes; outside = retain limited company tax efficiencies.
Who decides if I’m inside or outside IR35?
Since April 2021, the end client (if medium or large in the private sector) determines status and provides a Status Determination Statement (SDS). Small private clients (under £10.2m turnover, £5.1m balance sheet, 50 employees) leave the determination with the contractor. Public sector: client always decides.
How much less do I take home inside IR35?
Typically 8% to 15% of revenue less than outside, mainly because the 5% expenses allowance was abolished and employer NI 13.8% comes out of your day rate. On £100k of revenue, the gap is often £8,000 to £15,000 a year.
What is the optimal director’s salary?
For 2024-25: £12,570 (the personal allowance) is the most common choice. It minimises income tax + employer NI while keeping the year qualifying for State Pension. Some take £9,100 (the secondary NI threshold) to avoid all employer NI but lose the qualifying year unless paying voluntarily.
Can I switch from inside to outside on the same contract?
Only if the client reassesses and provides a new SDS, OR you genuinely change the working pattern (more substitution rights, mutuality of obligation, control). Just changing the contract wording without changing reality is risky and HMRC may challenge.
What is the Corporation Tax rate?
For 2024-25 + 2025-26: 19% on profits up to £50,000; 25% on profits above £250,000; marginal relief (effective 26.5%) on the slice between £50k and £250k. Most single-director contractor companies pay 19% on all profit.
How are dividends taxed?
You get a £500 dividend allowance (no tax). Above that: 8.75% in the basic rate band, 33.75% in the higher rate band, 39.35% in the additional rate band. Note dividends sit on top of your other taxable income, so your salary uses the bands first.
Should I take a small salary + dividends or an all-dividend approach?
A small salary of £12,570 is almost always optimal. It uses the personal allowance (no income tax), is corp-tax-deductible (saves 19% to 25%), and triggers a qualifying State Pension year if above £6,725 (lower earnings limit). Going below means an extra £329/yr of State Pension foregone for life.