IR35 Calculator — Inside
vs Outside IR35
Enter your day rate and see your real take-home under both IR35 scenarios — including the rate uplift you need to negotiate, and a step-by-step deemed salary breakdown.
If a client is putting you inside IR35, you'll need a higher day rate to take home the same amount. Enter your current outside IR35 rate and see what you need to charge inside IR35 to break even.
| Outside IR35 | Outside take-home | Inside rate needed | % uplift |
|---|
The deemed salary calculation shows how HMRC determines how much tax you owe when a contract is inside IR35 and your own PSC is responsible for making the deemed payment (typically when your end client is a small company).
What is IR35?
IR35 is a UK tax legislation designed to prevent "disguised employment" — where workers operate through a limited company (Personal Service Company, or PSC) but work in a way that is effectively equivalent to being an employee. Named after the HMRC press release that introduced it in 2000, IR35 determines whether your contract income should be taxed as employment income or as genuine self-employment income.
If your contract is outside IR35, HMRC accepts you as genuinely self-employed. You keep the tax advantages of operating through a limited company: corporation tax on profits (19–25%), lower dividend tax rates (8.75–39.35%), and no employer National Insurance on the bulk of your income. If your contract is inside IR35, your entire contract income is treated as deemed employment income — subject to income tax, employee NI, and employer NI as if you were on a payroll.
Since April 2021, medium and large private sector organisations are responsible for determining a contractor's IR35 status. Small companies (and overseas clients) still leave this responsibility with the contractor's own PSC.
Inside vs Outside IR35: Key Differences
| Outside IR35 (Ltd) | Inside IR35 (PAYE) | |
|---|---|---|
| Tax treatment | Corp tax (19–25%) + dividend tax (8.75–39.35%) | Income tax (20–45%) as employment income |
| National Insurance | Employer NI only on director salary (£1,136/yr on £12,570) | Employer NI 15% + employee NI 8–2% on full contract value |
| Who assesses status | Your PSC (if client is small/overseas) | End client / fee-payer (medium & large organisations) |
| Business expenses | Deductible against corporation tax | 5% allowance only (if PSC-assessed, small/overseas client) |
| Pension flexibility | Employer contributions via company, reduces corp tax | Employee contributions only through umbrella payroll |
| Employment rights | None — genuinely self-employed | Tax as employee, but typically no employment rights |
Who Assesses Your IR35 Status?
The rules changed in April 2021 for private sector contracts. Whether your PSC or the end client assesses your IR35 status depends on the client's company size:
| Client type | Who assesses? | From |
|---|---|---|
| Small private company | Your PSC assesses its own status | Always |
| Medium / large private company | End client assesses; fee-payer deducts PAYE at source | April 2021 |
| Public sector body | End client assesses; fee-payer deducts PAYE at source | April 2017 |
| Overseas client | Your PSC assesses its own status | Always |
Small company definition (from April 2026)
A company qualifies as "small" if it meets 2 of these 3 criteria in the previous financial year:
The 3 IR35 Status Tests
HMRC and the courts use three key factors to determine IR35 status. No single factor is conclusive — each engagement is assessed on the overall picture.
If the client dictates your working hours, location, and methods in detail, this points towards employment (inside IR35). Genuine contractors typically control how they deliver results, even if the client specifies what outcome they need.
A genuine right of substitution — where the client cannot insist on your personal service — strongly supports outside IR35. This right must be real, not just a contractual clause; the client must actually be willing to accept someone else qualified to do the work.
In a genuine contract arrangement, there is no ongoing obligation — the engagement ends when the project ends, with no expectation of further work. If the client continuously offers work and you are expected to accept it, this resembles employment. Note: HMRC's CEST tool does not currently assess mutuality of obligation — this is a known limitation.
How to Check Your Status: HMRC CEST Tool
HMRC's Check Employment Status for Tax (CEST) tool is the official way to determine whether IR35 applies to a contract. HMRC will stand behind the result, provided the information you enter is accurate and complete.
Updated April 2025 — now includes a "business on your own account" section covering exclusivity, concurrent engagements, and working time.
CEST produces one of three results:
CEST limitations: The tool does not assess mutuality of obligation — a key status factor. For complex or finely-balanced cases, consider an independent review from IR35 Shield, Qdos, or a specialist CTA alongside the CEST result.
Frequently Asked Questions
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