IR35 Calculator 2026/27 — Outside vs Inside vs Permanent
Enter your day rate to see your net take-home across all three scenarios: operating outside IR35 through a limited company, working inside IR35 via an umbrella, or taking a permanent role. Updated for April 2026 employer NI changes.
What is IR35 and why does it matter to your take-home pay?
IR35 is HMRC's off-payroll working legislation, introduced to prevent contractors from receiving the tax advantages of self-employment while working in a way that is effectively employment. If your engagement is deemed "inside IR35", your income is treated as a deemed salary — meaning income tax and National Insurance are deducted before you receive a penny, just as they would be for a permanent employee. If you are "outside IR35", you can operate through a limited company and extract income as a combination of salary and dividends, which is significantly more tax-efficient.
How the three scenarios compare
Outside IR35 (Ltd Co): You bill your client through your limited company. The company pays you a small director salary (typically up to the personal allowance of £12,570 to minimise income tax and NI), then distributes remaining profit as dividends after corporation tax. The combined effective rate is typically 25–35% on the full billing, well below the 45–50% effective rate inside IR35 at higher day rates.
Inside IR35 (umbrella): Your gross day rate is paid to an umbrella company, which deducts employer NI (15% above £9,100) and its management fee before calculating a deemed salary. That deemed salary then has income tax and employee NI deducted. You absorb both the employer and employee costs from the same pot, which is why the inside IR35 take-home is consistently lower.
Permanent employee: The calculator estimates an equivalent permanent salary at 80% of your annualised day rate — reflecting the premium contractors charge to cover the lack of holiday pay, sick pay, pension, and other employment benefits. Standard PAYE applies.
At £500/day over 228 days, the outside IR35 route typically produces £15,000–£20,000 more per year than inside IR35. The exact figure depends on your expenses, whether Employment Allowance applies, and how much of your profit falls in the corporation tax marginal relief band.
Your contract details
Annual billing: £0 · Tax year 2026/27 · Assumes single director, Employment Allowance applied
This calculator provides estimates for illustrative purposes only. It does not constitute tax advice. Figures assume UK residency, no other income, and standard thresholds for 2026/27. Consult a qualified tax adviser before making any decisions.
How this calculator works
- Outside IR35 — Ltd Co
- Director salary set at £12,570 (full personal allowance). Employer NI at 15% above £9,100 secondary threshold, offset by £10,500 Employment Allowance. Corporation tax at 19%/25% on remaining profit. All distributable profit taken as dividends.
- Inside IR35 — Umbrella
- Employer NI (15%) is deducted from the gross day rate before the deemed salary is calculated. A £1,500/year umbrella management fee is applied. Income tax and employee NI (8%/2%) are deducted from the deemed salary.
- Permanent employee
- Equivalent permanent salary is estimated at 80% of annualised day-rate billing (reflecting the premium contractors charge over employees). Standard PAYE income tax and employee NI apply.
- 2026/27 thresholds
- Personal allowance £12,570. Basic rate 20% to £50,270. Employer NI 15% above £9,100. Dividend allowance £500. Corporation tax 19% (≤£50k profit) / 25% (>£250k).
Frequently asked questions
What is IR35 and does it affect me?›
IR35 is HMRC's off-payroll working legislation. If HMRC determines your engagement looks like employment rather than genuine self-employment, your income is taxed as a deemed salary. If your contract is inside IR35, you pay income tax and NI as if employed. Outside IR35, you can operate through a Ltd Co and take salary plus dividends — typically retaining significantly more.
Why is outside IR35 (Ltd Co) usually more tax-efficient?›
Corporation tax on profits (19–25%) is lower than the combined income tax and NI rates on equivalent earnings. A director can pay a small salary (using the personal allowance) and take the rest as dividends, which attract lower tax rates than PAYE income. This difference is what IR35 is designed to eliminate for engagements that HMRC views as employment.
How does the umbrella company calculation work?›
Umbrella companies employ contractors and process the day rate as a deemed salary. The gross day rate first has employer NI (15%) and the umbrella's management fee deducted. The resulting deemed salary is then subject to income tax and employee NI — meaning the contractor effectively absorbs both employer and employee-side deductions.
What changed with employer NI in April 2026?›
The employer NI secondary threshold is £9,100 for 2026/27. This affects the Ltd Co calculation (employer NI on director salary above £9,100) and the umbrella calculation (employer NI absorbed before the deemed salary is calculated). The Employment Allowance of £10,500 can offset employer NI liability for eligible Ltd Co directors.
Can I use AccLedger to manage my Ltd Co accounts?›
Yes. AccLedger is built for UK limited companies — it handles bookkeeping, VAT, payroll (PAYE/RTI), dividends, director loan accounts, and corporation tax CT600. You can invite your accountant to review before filing.
Run your Ltd Co through AccLedger
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