IR35 Explained — UK Off-Payroll Working Rules & Take-Home Pay
Updated October 2026 · 5 min read
Quick start: Open the free IR35 Calculator — enter your contract rate and see inside vs outside IR35 take-home pay compared.
IR35 (officially the "off-payroll working rules") determines whether a contractor working through a limited company should be taxed as an employee. Getting the determination wrong can result in significant back-tax bills from HMRC.
Inside vs Outside IR35 — The Core Difference
| Outside IR35 | Inside IR35 | |
|---|---|---|
| Tax treatment | Company profits taxed via salary + dividends | Deemed employment — full PAYE + NIC |
| Take-home (£500/day) | ~£290–£340/day | ~£230–£270/day |
| Employer NIC | Not applicable | Deducted from contract rate |
| Who decides (since 2021) | Client (medium/large) or contractor (small) | Same |
Key IR35 Status Tests
HMRC looks at three main factors to determine status:
- Substitution: Can you send a substitute to do the work? A genuine right of substitution points strongly to outside IR35.
- Control: Does the client dictate how, when and where you work? High control = inside IR35.
- Mutuality of obligation: Is the client obliged to offer work, and are you obliged to accept it? Obligation on both sides points inside IR35.
CEST Tool and Professional Advice
HMRC provides the Check Employment Status for Tax (CEST) tool for determinations. However, CEST does not address all scenarios and its output is not always binding. For high-value or complex contracts, always seek advice from a specialist IR35 accountant or tax advisor — the cost of a determination review is small compared to a potential tax liability.
Compare Inside vs Outside IR35 Take-Home
Enter your day rate or annual contract value — see exactly how much IR35 status costs you.
Open Free IR35 Calculator →