IR35, also known as the "off-payroll working rules," is a piece of UK tax legislation designed to identify "disguised employees." These are workers who provide services through an intermediary (like a Limited Company) but would be considered employees if they worked directly for the client.
Inside vs. Outside IR35: What's the Difference?
Outside IR35: You are considered a genuine business entity. You pay Corporation Tax on profits and can distribute income via a combination of a low salary and dividends, which is generally more tax-efficient.
Inside IR35: HMRC views you as an employee for tax purposes. Your "fee" is treated like a salary. If working via an Umbrella company, the gross day rate must cover Employer National Insurance, the Apprenticeship Levy, and the Umbrella fee before your own taxes are deducted.
How This Calculator Works
This calculator provides an estimate based on the 2024/25 UK tax year figures:
Personal Allowance: £12,570.
Corporation Tax: Applied at a blended rate (estimated at 25% for simplified calculation).
Dividend Tax: Calculated after the £500 dividend allowance.
Inside IR35 Logic: Deducts 13.8% Employer NI and 0.5% Apprenticeship Levy from the gross rate to determine the taxable salary, then applies standard PAYE and Employee NI (8%).
Example Scenario
If you have a day rate of £500 working 5 days a week for 46 weeks a year, your gross revenue is £115,000.
As an Outside IR35 contractor, your net take-home might be significantly higher because you can offset expenses and benefit from lower dividend tax rates compared to the full PAYE burden of an Inside IR35 role.
Note: IR35 status is determined by your working practices and contract terms, not just by your preference. Always consult a qualified accountant for a formal contract review.
function calculateIR35() {
// Inputs
var dayRate = parseFloat(document.getElementById('dayRate').value);
var daysPerWeek = parseFloat(document.getElementById('daysPerWeek').value);
var weeksPerYear = parseFloat(document.getElementById('weeksPerYear').value);
var expenses = parseFloat(document.getElementById('annualExpenses').value);
if (isNaN(dayRate) || isNaN(daysPerWeek) || isNaN(weeksPerYear)) {
alert("Please enter valid numbers for the day rate and duration.");
return;
}
var grossAnnual = dayRate * daysPerWeek * weeksPerYear;
var personalAllowance = 12570;
// — OUTSIDE IR35 CALCULATION (Salary + Dividends) —
var optimalSalary = 12570; // NI Primary Threshold
var outsideExpenses = expenses;
var taxableProfit = grossAnnual – optimalSalary – outsideExpenses;
// Simple Corp Tax (25% for profits > 50k, 19% below – using 25% for safety in high rates)
var corpTaxRate = taxableProfit > 50000 ? 0.25 : 0.19;
var corpTax = taxableProfit * corpTaxRate;
var postTaxProfit = taxableProfit – corpTax;
// Dividend Tax logic (assuming £500 allowance)
var dividendAllowance = 500;
var taxableDividends = Math.max(0, postTaxProfit – dividendAllowance);
// Simplified Dividend Tax Brackets
var divTax = 0;
if (taxableDividends > 0) {
// This is a simplification of dividend tax bands
if (taxableDividends + optimalSalary personalAllowance) {
var taxableAmt = taxableSalaryInside – personalAllowance;
if (taxableAmt 12570) {
employeeNI = (taxableSalaryInside – 12570) * 0.08;
}
var insideNetTakeHome = taxableSalaryInside – incomeTax – employeeNI;
// Display Results
document.getElementById('resultsArea').style.display = 'block';
document.getElementById('outsideNet').innerText = "£" + outsideNetTakeHome.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
document.getElementById('insideNet').innerText = "£" + insideNetTakeHome.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2});
var difference = outsideNetTakeHome – insideNetTakeHome;
var diffText = "Working Outside IR35 nets you approximately £" + Math.abs(difference).toLocaleString(undefined, {maximumFractionDigits: 0}) + " more per year.";
if (difference < 0) {
diffText = "In this specific scenario, Inside IR35 appears more favorable (Rare – check your expense inputs).";
}
document.getElementById('savingsText').innerText = diffText;
// Smooth scroll to results
document.getElementById('resultsArea').scrollIntoView({ behavior: 'smooth', block: 'nearest' });
}