See exactly how much more you take home outside IR35 versus inside IR35. Enter your day rate to get a full comparison of limited company versus umbrella net pay, corporation tax, dividend tax, and effective rates.
230 days = 46 weeks billed, allowing for holiday and downtime
Equipment, software, training, travel. £1,500 accountancy already included.
Company pension (outside) or salary sacrifice (inside). Reduces taxable income.
Common day rates:
Limited company
£89,916
Effective tax rate: 39.9%
Umbrella company
£78,437
Effective tax rate: 47.5%
Being outside IR35 puts £11,479 more in your pocket per year (14.6% more than inside IR35)
Contract revenue: £149,500 · Working days: 230 · Day rate: £650
Calculations use 2026/27 UK tax rates. Outside IR35 assumes optimal salary/dividend structure with a fixed director salary of £12,570, employer NI at 15% above the £5,000 secondary threshold, and £1,500 accountancy fees. Inside IR35 assumes a compliant umbrella company deducting employer NI before deemed salary. Pension contributions are assumed to be company contributions (outside) or salary sacrifice (inside). Figures are estimates only. Consult a qualified contractor accountant before making decisions.
IR35 (formally, the off-payroll working rules) determines whether you should be taxed as a self-employed contractor or as an employee. If your contract is outside IR35, you operate through a limited company, take a mix of salary and dividends, and benefit from the lower tax rates on dividends and corporation tax. If you are inside IR35, you are treated as a deemed employee and all earnings are subject to PAYE income tax and National Insurance, usually processed by an umbrella company.
Since April 2021, medium and large private-sector clients have been responsible for determining your IR35 status, not you. This has led to many blanket inside-IR35 determinations that are worth challenging if your working practices genuinely support outside status.
Read our full guide: Inside vs. Outside IR35: What UK Software Engineers Need to Know Before Contracting
It depends on your day rate, but the difference is typically £15,000–£30,000 per year at common tech contractor rates of £500–£800/day. The gap is larger at higher day rates because dividend tax rates are lower than income tax rates at higher income levels. Our calculator shows the exact figure for your situation.
The most common approach is to pay a salary equal to the personal allowance (£12,570) so no income tax is due on the salary. Since the National Insurance primary threshold also sits at £12,570 in 2026/27, no employee NI is due either. Note that employer NI (15% above the £5,000 secondary threshold) is still payable by the company on this salary, which works out to approximately £1,136 per year.
The small profits rate is 19% on annual company profits up to £50,000. The main rate is 25% on profits of £250,000 or more. Companies with profits between £50,000 and £250,000 benefit from marginal relief, which tapers the rate between 19% and 25%. Most contractors with day rates below £750/day will pay at or near the small profits rate.
When you are inside IR35 and working via an umbrella, the umbrella deducts Employer National Insurance (15% above the £5,000 secondary threshold in 2026/27) from your contract rate before calculating your deemed salary. This is why inside-IR35 take-home is lower than people expect: the employer NI comes out of your day rate, not on top of it.
In most cases, no. The off-payroll working rules (IR35 reform) mean that inside-IR35 contractors are treated as employees for tax purposes. Travel and subsistence expenses to a regular client site are not deductible in the same way as for a genuine business. Some exceptions exist for wholly business-related expenses but the rules are restrictive. This is another factor that reduces inside-IR35 take-home.
Yes, significantly. For outside-IR35 contractors, employer pension contributions from your limited company are a business expense that reduces your company's taxable profit before corporation tax is calculated. For inside-IR35 contractors, salary sacrifice into a pension reduces the deemed salary subject to PAYE. In both cases, pension contributions receive meaningful tax relief that improves the overall financial picture.
