Inside IR35 Calculator — Deemed Employee Take-Home Pay (2026/27)
Calculate your take-home pay as a deemed employee inside IR35. Enter your day rate, working pattern, pension, and deductions below to see your net annual and monthly income after all taxes, NI, and levies. Updated for the 2026/27 tax year with the latest HMRC rates including the 15% employer NI rate and Scottish income tax bands.
How to Use This Calculator
Calculating your inside IR35 take-home pay takes just a few steps. Adjust any input and the results update instantly.
Enter Your Contract Rate
Set your day rate, days per week, and weeks per year to match your contract. The gross annual income updates automatically. Most contractors work 46 weeks per year after accounting for holidays and bank holidays.
Set Your Deductions
Adjust your pension contribution (as a percentage of gross income), select your student loan plan, and choose your location. Scotland uses five different income tax bands which can significantly affect your take-home pay inside IR35.
Review Your Take-Home Pay
See your net annual and monthly take-home pay after all deductions. The breakdown panel shows exactly where every pound goes, including employer NI, apprenticeship levy, pension, income tax, employee NI, and student loan. Compare against what you would net outside IR35 at the same rate.
Inside IR35 Explained
Understanding what deemed employment means for your contractor income.
When you work inside IR35, HMRC treats your contract as a “deemed employment” relationship for tax purposes. This means that even though you may have your own limited company or work through an agency, the income you earn is taxed as if you were a permanent employee of the end client. The practical effect is that your contract value is treated as employment income, and your intermediary (umbrella company or deemed employer) must operate PAYE on the full amount.
The key financial impact of inside IR35 status is the employer National Insurance charge. At 15% on earnings above £5,000 for 2026/27, this single deduction can take thousands of pounds from your annual contract value before you receive a penny. On top of employer NI, the apprenticeship levy adds 0.5%, and you then pay income tax at progressive rates (20%, 40%, or 45% depending on your total income, or the Scottish equivalent bands) plus employee National Insurance at 8% and 2%.
For a senior IT contractor earning £650 per day, the difference between inside and outside IR35 is typically £15,000–£25,000 per year in take-home pay, depending on your pension contributions and student loan status. This is why contractors negotiating rates for inside IR35 roles typically seek a day rate uplift of 15–30% to compensate for the additional tax and NI burden.
It is important to understand that inside IR35 is not simply a tax status — it affects how you run your business. You cannot claim travel and subsistence expenses against your contract income, you lose the ability to optimise via dividends, and your client or agency is responsible for determining your IR35 status through a Status Determination Statement (SDS). If you are caught by the off-payroll working rules (often called IR35), your fee-payer is responsible for calculating and deducting the correct tax and NI before paying you.
Worked Example
A senior IT contractor on £650/day, 5 days/week, 46 weeks/year inside IR35 with 5% pension contribution and no student loan.
| Item | Inside IR35 | Outside IR35 (for comparison) |
|---|---|---|
| Gross annual income | £149,500 | £149,500 |
| Employer NI (15%) | −£21,675 | — |
| Apprenticeship levy (0.5%) | −£748 | — |
| Pension contribution (5%) | −£7,475 | −£7,475 |
| Income tax | −£38,360 | — |
| Employee NI (8%/2%) | −£4,552 | — |
| Corporation tax (19–25%) | — | −£33,769 |
| Dividend tax (8.75/33.75/39.35%) | — | −£29,614 |
| Net annual take-home | £76,690 | £78,642 |
Assumptions and Limitations
This calculator provides illustrative estimates based on published HMRC rates. Every contracting situation is unique.
Tax Rates Assumed
- Personal allowance: £12,570 (2026/27)
- Basic rate 20%: £12,571–£50,270
- Higher rate 40%: £50,271–£125,140
- Additional rate 45%: over £125,140
- Scottish bands: Starter 19%, Basic 20%, Intermediate 21%, Higher 42%, Top 48%
- Employer NI: 15% above £5,000/year
- Employee NI: 8% / 2% thresholds
- Corporation tax: 19% (profits under £50k), marginal relief to 25%
- Dividend tax: 8.75% / 33.75% / 39.35% above £500 allowance
Key Limitations
- No other employment income or benefits in kind
- Standard personal allowance (no high-income taper applied)
- Inside IR35: assumes PAYE on full contract value after pension sacrifice
- Outside IR35: all post-tax profit drawn as dividends (no salary optimisation)
- No VAT, R&D credits, capital allowances, or CIS scheme considerations
- No marriage allowance or spouse salary/dividend splitting
- Student loan thresholds are annualised from weekly/monthly equivalents
Employer NI & Apprenticeship Levy
- Employer NI: 15% on earnings above £5,000 (increased from 13.8% in 2024 Budget)
- Apprenticeship levy: 0.5% of total pay bill
- Inside IR35: both are deducted from the contract value before you receive pay
- Outside IR35 (Ltd): no employer NI on dividend drawings, only on salary (typically minimal)
Student Loan Repayments
- Plan 1: 9% above £24,375/year
- Plan 2: 9% above £27,295/year
- Plan 4: 9% above £31,395/year
- Plan 5: 9% above £25,000/year
- Calculated on gross employment income before pension relief
Inside IR35 FAQ
Common questions about working inside IR35 as a UK contractor and how it affects your take-home pay.
Inside IR35 means HMRC deems you an employee for tax purposes even though you work through an intermediary (your limited company or an umbrella). Your contract income is treated as employment income, meaning you pay income tax and National Insurance through PAYE just like a permanent employee, and your client pays employer NI on your rate. This typically reduces your take-home pay by 20–30% compared to an outside IR35 contract at the same day rate.
Inside IR35 take-home pay starts with your gross contract income, then deducts employer NI (15% above £5,000), the apprenticeship levy (0.5%), your pension contribution (if any), income tax at 20/40/45% (or Scottish bands), employee NI at 8%/2%, and student loan repayments at 9%. The remaining amount is your net annual take-home. Unlike outside IR35, there is no corporation tax or dividend tax because the full contract value is treated as employment income.
Inside IR35 contracts incur: employer NI at 15% on earnings above £5,000 (paid by the client from your contract value), apprenticeship levy at 0.5% of the total pay bill, income tax via PAYE at progressive rates (20%/40%/45% or Scottish equivalents), employee NI at 8% on earnings between £12,570 and £50,270 and 2% above that, pension contributions (salary sacrifice if you opt in), and student loan repayments at 9% above the relevant threshold for your plan.
Expense claims are significantly restricted inside IR35. You cannot claim travel and subsistence expenses against your contract income because you are treated as an employee for tax purposes. The only common deductions are pension contributions (typically via salary sacrifice) and the standard £12,570 personal allowance. You should speak to an accountant about any allowable professional expenses such as relevant professional subscriptions or required equipment not provided by your client.
If you are inside IR35 your intermediary (umbrella or deemed employer) must auto-enrol you into a workplace pension. Your minimum contribution is typically 5% of qualifying earnings and your employer contributes 3%. Many contractors choose to contribute more via salary sacrifice, which reduces your income tax and NI liability while building retirement savings. The calculator allows you to set a pension percentage up to 15% to see the effect on your take-home pay.
Inside IR35 take-home is typically 20–30% lower than outside IR35 at the same day rate. This is because inside IR35 you pay both employer and employee NI plus income tax via PAYE on the full contract value. Outside IR35, you can optimise via salary and dividends, paying corporation tax and dividend tax instead of employer and employee NI. Use the comparison panel in this calculator to see the exact difference for your specific rate, pension, and deductions. For most contractors the gap is £15,000–£25,000 per year.
The apprenticeship levy is 0.5% of your total pay bill. Although the levy technically only applies when your employer's annual pay bill exceeds £3 million, inside IR35 arrangements commonly pass through an equivalent charge as a line item deducted from your contract value before you receive your pay. For a contractor earning £149,500 gross, this amounts to approximately £748 per year. While not the largest deduction, it adds to the overall tax burden that makes inside IR35 less tax-efficient than operating through your own limited company outside IR35.