Compare inside IR35 (PAYE) vs outside IR35 (Limited Company) net take-home.
Inside IR35 net
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Outside IR35 net
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Your breakdown
Updates live as you type| Step | Inside IR35 | Outside IR35 |
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What sitting inside or outside IR35 really changes
IR35, formally the off-payroll working rules, asks a simple question with expensive consequences: if we strip away your limited company, would you look like an employee of the client? If yes, you are inside IR35 and your fee is taxed almost exactly like a salary, with PAYE income tax and National Insurance taken before you see it. If no, you are outside, and you can run your company tax-efficiently, taking a small salary topped up with dividends. This calculator compares the net take-home of both routes on the same day rate so you can see the gap in pounds.
Comparing a £500 day rate, 220 days
Take the defaults: £500 a day over 220 working days is £110,000 of revenue, with £5,000 of company expenses. Inside IR35, the whole £110,000 runs through PAYE. Income tax comes to £33,432 and employee National Insurance to £4,211, leaving £72,357 net. Outside IR35, the model pays a £12,570 salary, deducts the £5,000 expenses, and treats the remaining £92,430 as company profit. Corporation tax at 25 percent takes £23,108, leaving £69,323 of dividends. After the £500 dividend allowance and dividend tax of £13,803, the outside net is £68,090. On these numbers the simplified model actually leaves inside IR35 ahead by £4,267.
Why outside does not always win, and what the model leaves out
That result surprises contractors who assume a limited company is always cheaper, so it is worth being clear about the mechanics. At higher revenue the outside route gets squeezed from two sides: corporation tax takes 25 percent of profit before any money reaches you, and the dividends that remain are then taxed, with the slice above the basic-rate band hit at 33.75 percent. The model also keeps salary at the £12,570 personal allowance and ignores some real-world levers that usually tilt the balance back towards outside, such as employer pension contributions made straight from the company before corporation tax, the employment allowance, and splitting shares with a spouse. The gap also narrows or reverses at lower day rates. The honest takeaway is that the outside advantage is real but smaller than the contractor folklore suggests, and at six-figure revenue with a bare-bones structure it can vanish.
Who decides your status, and who this helps
Since April 2021 the off-payroll reforms put the status decision in the hands of the client, not the contractor, for medium and large private-sector engagements as well as the public sector. An inside determination means you are taxed as an employee but receive none of the employment rights, no holiday pay, no sick pay, no redundancy. This calculator is for contractors and freelancers comparing roles, and for anyone negotiating a rate uplift to offset an inside determination. A practical tip: if a client puts you inside, ask for a higher day rate to compensate, because the model shows the take-home gap you are trying to close. The biggest mistake is operating outside IR35 with no defensible substance, such as a right of substitution, control over how you work, and genuine financial risk, then losing an HMRC enquiry and facing back taxes. These rules apply across the UK; the income tax element differs only for Scottish taxpayers, whose bands and rates are set by the Scottish Parliament.
Do I pay employers National Insurance if I am inside IR35?
When you work through an agency or are deemed employed by the client, employers National Insurance is generally accounted for by the fee-payer, and in practice it is often reflected in the rate offered to you. That is one reason inside-IR35 day rates quoted by agencies can look lower than an equivalent outside contract: the employers NI has effectively been carved out before the figure reaches you.
Can I keep my limited company while working inside IR35?
Yes. Many contractors run a mix, taking some engagements inside and others outside, and keep the company open throughout. Income from inside-IR35 work is taxed at source as deemed employment, so it largely passes through the company without further corporation tax, while outside work is processed in the usual salary-plus-dividends way.