Calculate your take-home pay inside vs outside IR35. Compare contractor net income for 2024/25 tax year.
IR35 Take-Home Pay Calculator (2024/25)
Inside IR35
Deemed Salary
Income Tax
Employee NI
Take-Home
Outside IR35
Salary + Dividend
Corp Tax + Inc Tax
NI (Director)
Take-Home
Outside IR35 advantage:
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IR35: Inside vs Outside — What's the Difference?
IR35 (officially the "off-payroll working rules") is UK tax legislation that determines whether a contractor is a genuine business or a "disguised employee." If a contract falls inside IR35, the contractor is taxed like an employee. If it falls outside IR35, the contractor can operate through a limited company with significant tax savings.
Inside IR35: How Tax Works
95% of the contract income is treated as a deemed salary. The contractor pays Income Tax (20%, 40%, 45%) and Employee National Insurance on this deemed salary. The 5% expenses allowance was removed for public sector and large private clients in 2021. The effective tax burden is similar to being a permanent employee.
Outside IR35: The Tax Advantage
Operating outside IR35 through a limited company allows the optimal salary/dividend split. Directors typically pay themselves a salary at the NI threshold (£12,570) and take the rest as dividends, which are taxed at lower rates (8.75% basic, 33.75% higher) with a £500 tax-free dividend allowance (2024/25).
IR35 Status Determination
HMRC's Check Employment Status for Tax (CEST) tool is the official way to determine status. Key factors include: Substitution (can someone else do your work?), Mutuality of Obligation (is either party obliged to offer/accept work?), and Control (does the client control how you work?). A contract review by a specialist IR35 accountant is recommended for high-value contracts.
Frequently Asked Questions
Since April 2021, medium and large private sector clients determine IR35 status (this was the Off-Payroll Working reform). The client issues a Status Determination Statement (SDS). Small companies (under 2 of these 3: turnover <£10.2M, balance sheet <£5.1M, <50 employees) are exempt — in those cases, the contractor's limited company determines its own status.
An IR35 contract review is a professional assessment of your contract and working practices by a specialist IR35 lawyer or accountant. They assess the three key status tests (substitution, control, mutuality of obligation) and advise whether your engagement falls inside or outside IR35. Most reviews cost £150–£500 and are highly recommended before starting any high-value contract.
Yes. A contractor can have multiple clients, some inside and some outside IR35. Each engagement is assessed independently. You must track income from each type separately and ensure the correct tax treatment is applied to each.
IR35 insurance (also called tax investigation insurance or contract review insurance) covers the cost of defending an HMRC IR35 investigation, including professional fees and any tax, interest, and penalties if you lose. Policies typically cost £100–£300/year. Given that HMRC IR35 investigations can cost tens of thousands in fees, insurance is considered essential by many contractors.