Inside IR35 Net Pay Calculator (UK 2024/25)
Estimate your take-home pay when working via an Umbrella Company
How Does an Inside IR35 Calculation Work?
When you are deemed "Inside IR35", HM Revenue & Customs (HMRC) views your engagement as "disguised employment." This means you must pay roughly the same Income Tax and National Insurance contributions as a permanent employee. However, because most contractors work through an Umbrella Company, the calculation is more complex than a standard salary slip.
Your Assignment Rate (the day rate agreed with the agency) is not your gross salary. Instead, it is the total cost to the Umbrella company. Out of this rate, several "employment costs" must be deducted before arriving at your gross taxable pay:
- Employer National Insurance: Currently 13.8% on earnings above the secondary threshold.
- Apprenticeship Levy: A 0.5% tax paid by large employers (or those with high payrolls) to fund apprenticeship schemes.
- Umbrella Margin: The fee the umbrella company charges to process your payroll.
- Employer Pension: Contributions to your workplace pension.
Real-World Example Calculation
If you are on a £500 per day rate, working 5 days a week, your weekly assignment rate is £2,500.
| Description | Estimated Amount (Weekly) |
|---|---|
| Assignment Rate | £2,500.00 |
| Umbrella Fee & Emp. Costs | -£385.00 |
| Gross Taxable Pay | £2,115.00 |
| Income Tax & Employee NI | -£720.00 |
| Net Take Home | £1,395.00 |
Frequently Asked Questions
1. Why is my take-home pay so much lower than Outside IR35?
Outside IR35 allows you to pay yourself a small salary and high dividends, which results in lower tax and no Employer NI. Inside IR35 mandates full PAYE taxation on 100% of the income.
2. Can I claim expenses Inside IR35?
Generally, no. Under Supervision, Direction, or Control (SDC) rules, most Inside IR35 contractors cannot claim travel or subsistence expenses unless they are visiting a temporary site that is not their main workplace.
3. What is the Personal Allowance?
For the 2024/25 tax year, the first £12,570 of your income is tax-free. However, if you earn over £100,000, this allowance is tapered away by £1 for every £2 earned over that threshold.