IR35 Inside Calculator UK 2026/27

The inside IR35 calculation has a critical step that surprises many contractors: employer NI (15% on earnings above the £5,000 secondary threshold) is deducted from the assignment rate before your deemed salary is calculated. On a £110,000 annual contract, employer NI costs approximately £15,750 — money that goes straight to HMRC and never appears in your payslip as salary.

The full sequence is: (1) Start with assignment rate. (2) Deduct employer NI (15% above £5,000). (3) Deduct Apprenticeship Levy (0.5%). (4) Deduct umbrella margin and pension contributions. (5) Apply income tax and employee NI to the remaining deemed salary. Many older calculators still use 13.8% employer NI (pre-April 2025) and the old £9,100 secondary threshold — significantly underestimating the true cost of inside IR35. Our calculator uses the confirmed 2026/27 rates: 15% employer NI, £5,000 threshold. Source: GOV.UK rates and thresholds for employers 2026/27; House of Commons Library 2026/27 tax briefing.

Most contractors need a day rate uplift of 15–25% to maintain the same take-home pay when moved from outside to inside IR35. The precise amount depends on your current rate, working days, and individual tax position. At £400/day (220 days, £88,000 contract), the typical uplift needed is approximately £75–£95/day (18–24%). At £600/day (£132,000 contract), typically £90–£120/day (15–20%).

The key argument to make to a client is that when inside IR35 they benefit from an 'employee' without paying employment costs — no employer NI on contract rate, no holiday pay, no sick pay, no pension contributions, no training. The employer NI alone (15% × contract rate above £5,000) represents £13,000–£19,000 per year at typical contractor rates. This is a cost the client avoids by engaging you as a contractor rather than hiring directly. Use our calculator's rate uplift table to find the exact figure for your specific circumstances.

From 6 April 2026, dividend tax rates increased by 2 percentage points: the basic rate rose from 8.75% to 10.75%; the higher rate rose from 33.75% to 35.75%. The additional rate (39.35%) and the £500 dividend allowance are unchanged. These changes were announced in the Autumn Budget 2025 and legislated through the Finance Act 2026.

The practical impact on outside IR35 contractors: a director taking £50,000 in dividends above the allowance pays approximately £990 more per year in 2026/27 compared to 2025/26 (source: Accounted Ltd dividend tax guide, 2026). This narrows the inside vs outside IR35 take-home gap by £1,000–£2,000 compared to last year. Despite this, outside IR35 remains significantly more tax-efficient — dividends are still taxed at lower rates than salary, and there is no employer NI or employee NI on dividends.

Both result in the same PAYE taxation on your deemed employment income, but they differ in structure. An umbrella company employs you directly. You sign an overarching employment contract with the umbrella. The umbrella invoices the agency/client, deducts employer NI, Apprenticeship Levy, its own weekly margin, and pays you via PAYE. It's simpler — no company to maintain, no accounts to file, no corporation tax returns. The margin is typically £20–£35/week.

Operating inside IR35 through your own limited company uses the deemed payment calculation (Chapter 8 or Chapter 10 rules). You run the calculations (or have an accountant do so), pay the deemed salary to yourself via PAYE, and file annual accounts and corporation tax returns. There may be a small residual company profit from the 5% expenses allowance (for small client engagements) which can be extracted as dividends. The difference in net take-home between the two routes is typically small (£500–£2,000/year at most) — for most contractors, an umbrella is simpler and nearly equivalent in outcome. Source: IR35 Calculator comparison at IR35Guide.co.uk (March 2026).

Yes. For medium and large private sector clients (Chapter 10 off-payroll rules), you can formally disagree with an inside IR35 Status Determination Statement (SDS) within 45 days of receiving it. The client must respond within 45 days with either a revised determination or a maintained original with written reasons. If the client fails to issue an SDS at all, or issues one without taking reasonable care, the tax liability reverts to the client — not you.

Blanket inside-IR35 determinations (applying the same status to all contractors without individual assessment) do not meet the reasonable care standard and are legally challengeable. In practice, larger organisations have legal teams experienced in defending determinations, so a challenge often requires professional IR35 contract review support. Qdos and IPSE offer IR35 insurance and contract review services. HMRC's CEST tool at tax.service.gov.uk provides a free assessment that HMRC commits to standing behind (subject to information accuracy). Source: IR35 Take-Home Calculator (ukcalculator.com, March 2026), HMRC IR35 guidance.

Employer pension contributions are deducted from the assignment rate before the deemed employment income is calculated. This means they reduce the base on which employer NI (15%), income tax, and employee NI are all applied — saving three taxes simultaneously. For a higher-rate taxpayer inside IR35, each £1,000 of employer pension contribution saves approximately: 40% income tax = £400, 2% employee NI = £20, 15% employer NI = £150. Total saving: ~£570 per £1,000 contributed. This means the effective cost of saving £1,000 in your pension is only £430.

The pension annual allowance is £60,000 for 2026/27. In practice, pension contributions must come from income — if your assignment rate is £110,000 and you contribute £30,000 to pension, your deemed employment income is approximately £69,800 after employer NI and Apprenticeship Levy. This is a powerful strategy, particularly for inside IR35 contractors approaching retirement. Use our SIPP Calculator to model long-term growth alongside these contributions. Source: IR35Rules.co.uk pension strategy guide.

If all your contracts are inside IR35, your limited company becomes largely ineffective from a tax perspective — you cannot extract the tax advantages of salary/dividend splitting because all income must go through the deemed payment calculation. Your company will still be responsible for calculating and paying the deemed payment, filing accounts, and paying any corporation tax on residual profit (such as the 5% expenses allowance from small client engagements).

For many contractors in this position, working through an umbrella company is simpler and nearly equivalent in net outcome — it removes the administrative burden of running a limited company while inside IR35. However, keeping your limited company open maintains flexibility to revert to outside IR35 engagements in future. Costs of maintaining a dormant or low-activity limited company (accountancy, confirmation statement £34/year) are typically £500–£1,000/year — worth weighing against the convenience. If you permanently move to inside IR35 or PAYE employment, a tax-efficient exit from the company (potentially using Business Asset Disposal Relief) may be worth exploring with an accountant.