Tax & Salary · 2025/26
Inside vs Outside IR35 Take-Home
If you’re a UK contractor through a limited company, IR35 status determines whether you pay tax like an employee (inside) or via salary + dividends (outside).
£
days
Illustrative comparison. Excludes expenses, pension contributions and accountancy fees.
Outside-IR35 advantage
£5,352
per year on £110,000 billing
Take-home comparison
- Inside IR35 (deemed employee)£65,222
- Outside IR35 (Ltd Co)£70,574
- Difference£5,352
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The maths, explained
How this calculator works
How we calculated your result
Inside-IR35: fee-payer deducts employer NI 15% first, then PAYE + employee NI on the deemed employment payment. Outside-IR35: £12,570 salary + dividends after 19/25% corporation tax. Dividend tax: 8.75% / 33.75% / 39.35%.
Official UK rules in simple English
- From April 2021, end-clients (medium/large) determine IR35 status.
- Small companies: contractor still determines their own status.
- Use HMRC’s CEST tool — though it’s widely criticised.
- Mutuality, substitution and control are the key tests.
Common pitfalls to watch out for
Inside vs ‘deemed employee’
Inside IR35 doesn’t make you an employee — no holiday, sick or pension auto-enrolment from the client.Don’t forget Apprenticeship Levy and accountancy
Real Ltd Co overhead: ~£1,200/yr accountant, IR35 insurance, dormant year compliance.Pension contributions through Ltd Co
Employer pension contributions sidestep both corp tax and dividend tax — biggest legal Ltd Co advantage.
Frequently asked questions
Umbrella vs inside-IR35 PSC?
Net pay is similar; umbrella is admin-simpler but has its own fee + employer NI deducted.
Is outside-IR35 ever worth it on £500/day?
Yes — typically £8–12k/year better net than inside, before pension benefits.
Educational. Heavily simplified — get an accountant before changing structure.