Off-Payroll Working (IR35)
Compare contractor take-home inside IR35 (deemed employment payment with employer NIC and apprenticeship levy) versus outside IR35 through a limited company (corporation tax + dividends).
Data verified · July 2026
Who decides my IR35 status?
For medium and large clients, the client issues a Status Determination Statement and the fee-payer deducts tax at source. For small clients, your own company assesses status and operates the deemed payment if inside.
Source: HMRC — Understanding off-payroll working (gov.uk/guidance/understanding-off-payroll-working-ir35); rates and thresholds for employers 2025/26; ESM8155 (5% expenses allowance). · updated 2026
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Everything about Off-Payroll Working (IR35)
📋Overview+
Models the 2025/26 deemed employment payment chain: the fee is grossed down for employer NIC (15%) and apprenticeship levy (0.5%), then income tax and employee NIC are applied. The outside route pays a £12,570 salary, corporation tax with marginal relief, and distributes the remainder as dividends.
💡 Best practices
- Employment Allowance cannot be used against deemed payments — employer NIC applies from the £5,000 secondary threshold.
- The outside-IR35 route assumes full profit distribution as dividends; retaining profit in the company defers dividend tax.
- Status is determined by working practices (control, substitution, mutuality of obligation), not by contract labels — check with HMRC's CEST tool.
🔢 Concrete example
£500/day over 220 days (£110,000 fee, large client): inside IR35 nets £66,172 (deemed payment £95,887 after £13,633 employer NIC and £479 levy); outside nets £71,413 (£21,768 corporation tax, £15,684 dividend tax). Being inside costs £5,240/yr (4.8% of the fee).
📖User guide+
How to use this calculator
- 1
Enter your day rate and billable days per year.
- 2
Select whether the client is a small company (Chapter 8 — 5% expenses allowance applies).
- 3
Compare net income inside vs outside IR35 and the effective cost of being inside.
📚Glossary+
- Deemed employment payment
- The amount treated as employment income when a contract is inside IR35: the fee net of employer NIC and apprenticeship levy borne by the fee-payer.
- Chapter 8 vs Chapter 10
- Small private-sector clients: the contractor's company applies the rules (5% allowance). Medium/large clients: the fee-payer deducts at source and no 5% allowance applies.
ℹ️Sources & updates+
Last data update
July 5, 2026
Sources and references
HMRC — Understanding off-payroll working (gov.uk/guidance/understanding-off-payroll-working-ir35); rates and thresholds for employers 2025/26; ESM8155 (5% expenses allowance).
The data in this calculator is updated regularly to reflect the latest official rates. When in doubt, consult the official sources listed above.
FAQ — Off-Payroll Working (IR35)
Who decides my IR35 status?+
For medium and large clients, the client issues a Status Determination Statement and the fee-payer deducts tax at source. For small clients, your own company assesses status and operates the deemed payment if inside.
Why is employer NIC deducted from my rate inside IR35?+
The fee-payer's employer NIC (15% in 2025/26) and apprenticeship levy (0.5%) come out of the contract fee before the deemed payment is taxed, which is why inside-IR35 take-home drops sharply.
Is the outside-IR35 figure guaranteed?+
No — it is a simplified model (£12,570 salary, full dividend distribution, no expenses or pension planning). Actual results depend on your company's costs and remuneration strategy.