Contractor IR35 Calculator UK (2026/27)
On an annual contractor fee of £120,000 in 2026/27, contracting Outside IR35 via a personal service company (PSC) yields £74,654.38 in net take-home pay (using a £12,570 salary and dividends). Contracting Inside IR35 yields £62,907.40 under deemed employment, giving Outside IR35 an advantage of £11,746.98.
Key 2026/27 Statutory Facts
- Outside IR35 contractors draw an optimal director salary of £12,570 with remaining profits taken as dividends. [Source: GOV.UK]
- Corporation Tax is 19% under £50,000 profits, 25% over £250,000, and marginal relief applies between £50k and £250k. [Source: GOV.UK]
- Dividend tax rates for 2026/27 are 10.75% (Basic), 35.75% (Higher), and 39.35% (Additional) over a £500 allowance. [Source: GOV.UK]
- Employer National Insurance is 15.0% on earnings above the £5,000 secondary threshold. [Source: GOV.UK]
- Inside IR35 contractors bear both employer and employee National Insurance alongside standard PAYE income tax. [Source: GOV.UK]
How Contractor Take-Home is Computed (Inside vs Outside IR35)
Contracting in the UK involves two radically different taxation structures depending on your IR35 status:
- Outside IR35 (Personal Service Company): The company invoices the client. The director receives an optimal salary (£12,570) deductible against Corporation Tax. Remaining post-tax company profits are distributed as dividends taxed at dividend rates (10.75% / 35.75%).
- Inside IR35 (Deemed Employment / Umbrella): The contract fee is treated as an employer cost. Employer National Insurance (15% above £5,000) and umbrella margins are subtracted first, followed by PAYE Income Tax and Class 1 Employee NI.
Worked Example: £120,000 Annual Contract Fee
| Item / Tax Stage | Outside IR35 (PSC) | Inside IR35 (Deemed) |
|---|---|---|
| Contract Fee / Gross Invoiced | £120,000.00 | £120,000.00 |
| Director Salary / PAYE Salary | £12,570.00 | £102,750.00 |
| Employer National Insurance | £1,135.50 | £17,250.00 |
| Corporation Tax | £24,418.04 | — |
| Personal Income Tax / Dividend Tax | £19,792.08 (Div Tax) | £35,432.00 (PAYE) |
| Employee National Insurance | £0.00 | £4,410.60 |
| Total Net Take-Home Pay | £74,654.38 | £62,907.40 |
| Outside IR35 Advantage | +£11,746.98 / year | |
Methodology & Assumptions
Our 2026/27 calculations strictly apply primary legislation published by HM Revenue & Customs. Specific assumptions include:
- Calculations reflect the 2026/27 tax year (6 April 2026 to 5 April 2027).
- Standard tax codes 1257L (England, Wales, NI) and S1257L (Scotland) are assumed unless adjusted.
- Class 1 National Insurance thresholds are annualized; in actual UK payroll, NI is assessed on a non-cumulative pay-period basis.
- Special allowances such as Blind Person’s Allowance (£3,070) or Marriage Allowance (£1,260) are excluded from baseline calculations unless selected.
Frequently Asked Questions (2026/27)
Is it better for a contractor to be inside IR35 or outside IR35?
Operating Outside IR35 is almost always more tax-efficient, yielding higher net take-home pay through a combination of low director salary and dividend distributions without Employer NI on dividends. However, your IR35 status is determined by your contractual working practices, not personal preference.
What does it mean for a contractor to be inside IR35?
Being Inside IR35 means HMRC views your engagement as deemed employment for tax purposes. The fee payer or umbrella company must deduct Employer NI (15% above £5,000), apprenticeship levy, employee Class 1 NI, and PAYE income tax from your assignment rate before paying your net salary.
How much take-home pay is £400 a day inside vs outside IR35?
On a £400 day rate (5 days/week, 48 weeks = £96,000 revenue) in 2026/27, an Outside IR35 contractor takes home £63,320.68 net compared to £52,587.40 Inside IR35, representing an Outside IR35 financial advantage of £10,733.28 per year.
How much take-home pay is £500 a day inside vs outside IR35?
On a £500 day rate (£120,000 annual revenue) in 2026/27, an Outside IR35 contractor retains £74,654.38 net (paying £24,418.04 Corporation Tax and £19,792.08 dividend tax). Contracting Inside IR35 yields £62,907.40 net, giving Outside IR35 an advantage of £11,746.98.
How much take-home pay is £600 a day inside vs outside IR35?
On a £600 day rate (£144,000 annual fee) in 2026/27, Outside IR35 take-home pay is £85,988.08 compared to £67,256.40 Inside IR35, providing an Outside IR35 advantage of £18,731.68 per year.
How much take-home pay is £750 a day inside vs outside IR35?
On a £750 day rate (£180,000 annual fee) in 2026/27, Outside IR35 take-home pay is £102,988.63 compared to £80,936.40 Inside IR35, yielding an Outside IR35 retention advantage of £22,052.23 per year.
How do you calculate inside IR35 take-home pay in 2026/27?
To calculate Inside IR35 pay, first deduct Employer NI (15% on earnings above £5,000 per year) and apprenticeship levy from your gross contract fee to find your deemed gross salary. Then apply standard PAYE Income Tax and employee Class 1 National Insurance.
What business expenses can you claim inside IR35?
Contractors inside IR35 can claim virtually no business expenses against tax, because HMRC treats the contract as employment. Travel to the client site, subsistence, and standard home office expenses cannot be deducted, unlike for genuine Outside IR35 limited companies.
Who is exempt from the off-payroll working (IR35) reform rules?
Small private sector businesses (meeting two of: turnover under £10.2m, balance sheet total under £5.1m, or fewer than 50 employees) are exempt from determining IR35 status. When contracting for an exempt client, the contractor retains the legal responsibility to assess their own status.
How do I convert an outside IR35 day rate to an inside IR35 rate?
To maintain equal net take-home pay when transitioning from an Outside to an Inside IR35 contract, you typically need to increase your headline day rate by 20% to 30% to compensate for Employer NI, Apprenticeship Levy, and higher PAYE deductions.
Related UK Tax & Finance Calculators
Take-Home Pay Calculator
Calculate your net pay after Income Tax, National Insurance, and Student Loan deductions for 2026/27.
Calculate Salary → TaxIncome Tax Calculator
View exact tax band breakdowns for England, Wales, NI, and Scotland (all 6 devolved tiers).
Calculate Tax → PropertyStamp Duty (SDLT) Calculator
Calculate residential SDLT for standard moves, first-time buyer relief, and additional properties.
Calculate SDLT →