Contractor IR35 Calculator - Calculate Take-Home Pay 2025/26
Free calculator to determine contractor take-home pay inside and outside IR35 with accurate UK tax rates for 2025/26 tax year
IR35 Calculator 2025/26
Take-Home Pay Results
What is a Contractor IR35 Calculator?
A Contractor IR35 Calculator is a free tax tool that helps UK contractors determine their take-home pay based on their IR35 status. It calculates the difference between working inside IR35 (deemed employment) and outside IR35 (genuine self-employment via limited company).
This calculator works for:
- IT contractors - Determining optimal contract structure
- Limited company directors - Understanding tax implications
- Freelance consultants - Comparing inside vs outside IR35
- Contract negotiators - Calculating required day rates
To understand how PAYE taxation works for inside IR35 contracts, check out our UK PAYE Salary Calculator to see detailed tax and National Insurance calculations for employed status.
For calculating your overall UK tax liability outside IR35, explore our UK Tax Calculator to determine income tax and National Insurance on different income sources.
To plan federal tax obligations if you work internationally, use our Federal Income Tax Calculator to calculate US tax liability and effective rates.
For understanding how salary increases affect your tax position, try our Pay Raise Calculator to see the impact of contract rate changes on take-home pay.
To track pension contributions and tax relief for outside IR35 contractors, check our Payroll Tax Calculator to optimize your director's salary and pension strategy.
How the IR35 Calculator Works
Inside IR35 Calculation:
Step 1: Gross Income = Day Rate × Working Days
Step 2: Deemed Employer Costs = 5% of Gross
Step 3: Deemed Salary = Gross - Employer Costs
Step 4: Income Tax (20%/40%/45% on bands)
Step 5: Employee NI (8% then 2%)
Step 6: Employer NI (15% on earnings)
Result: Take-Home = Deemed Salary - All Taxes
Outside IR35 Calculation:
Step 1: Gross Income = Day Rate × Working Days
Step 2: Taxable Profit = Gross - Expenses - Salary
Step 3: Corporation Tax (19% or 25%)
Step 4: Available Dividends = Profit - Corp Tax
Step 5: Dividend Tax (8.75%/33.75%/39.35%)
Result: Take-Home = Salary + Dividends - Div Tax
Key IR35 Concepts Explained
Off-Payroll Working Rules
Since April 2021, medium and large organizations determine IR35 status. Small companies and contractors remain responsible for their own status determination. The hiring organization deducts tax for inside IR35 contracts.
5% Deemed Employer Costs
HMRC allows 5% of contract value as deemed employer costs for inside IR35 contracts. This reduces the deemed salary before income tax and National Insurance calculations, providing small tax relief.
Corporation Tax Bands
19% for profits under £50,000, 25% for profits over £250,000. Marginal relief applies between these thresholds. Most contractors earning £50,000-£150,000 pay 19% corporation tax.
Dividend Allowance
£500 dividend allowance for 2025/26 (reduced from £1,000). Dividends within this allowance are tax-free. Dividends above are taxed at 8.75%, 33.75%, or 39.35% based on your income band.
How to Use This Calculator
Enter Your Day Rate
Input your daily contract rate in pounds (e.g., £500)
Specify Working Days
Enter annual working days (typically 220-230 days)
Select IR35 Status
Choose inside, outside, or compare both scenarios
Add Outside IR35 Details
Enter director's salary and business expenses if applicable
View Results
See take-home pay, tax breakdown, and IR35 comparison
Benefits of Using This Calculator
- • Compare IR35 Scenarios: Instantly see the difference between inside and outside IR35 to make informed contract decisions.
- • Accurate 2025/26 Rates: Uses latest UK tax rates including income tax, National Insurance, corporation tax, and dividend tax.
- • Negotiate Better Rates: Understand minimum day rates needed to maintain your desired take-home pay under different IR35 statuses.
- • Optimize Company Structure: Calculate optimal director's salary and dividend split for maximum tax efficiency outside IR35.
- • Plan Business Expenses: See how legitimate business expenses reduce your tax burden and increase take-home pay.
Factors That Affect Your Results
1. IR35 Determination
Whether your contract is inside or outside IR35 dramatically affects take-home pay. Outside IR35 typically yields 15-25% higher take-home pay through dividend tax efficiency.
2. Contract Value
Higher contract values push you into higher tax bands (40%, 45%) and may trigger 25% corporation tax above £250,000 profit, affecting overall tax efficiency.
3. Director's Salary Choice
Common strategies: £12,570 (personal allowance - no tax), £9,100 (employer NI threshold), or £6,396 (lower earnings limit). Each affects NI and tax differently.
4. Business Expenses
Legitimate expenses (travel, equipment, training, subscriptions) reduce taxable profit before corporation tax, directly increasing take-home pay pound-for-pound up to 81p per £1 spent.
Frequently Asked Questions (FAQ)
Q: What is IR35 and how does it affect contractors?
A: IR35 is UK tax legislation that determines whether a contractor is truly self-employed or effectively an employee for tax purposes. Inside IR35 means you're treated like an employee and pay more tax via PAYE. Outside IR35 means you can operate as a genuine business through a limited company with tax advantages like dividend income and business expense deductions.
Q: What's the difference between inside and outside IR35?
A: Inside IR35: You pay income tax and National Insurance like an employee (after 5% deemed employer costs), with limited expense deductions and lower take-home pay. Outside IR35: You can pay yourself a small salary and take remaining profits as dividends (after corporation tax), claim business expenses, and typically achieve higher take-home pay.
Q: How is take-home pay calculated for inside IR35?
A: Inside IR35 take-home pay: Contract income minus 5% deemed employer costs equals deemed salary. From this, deduct income tax (20%/40%/45% based on bands), employee National Insurance (8% up to £50,270, then 2%), and employer National Insurance (15% above threshold). The result is your take-home pay.
Q: How is take-home pay calculated for outside IR35?
A: Outside IR35 take-home pay: Contract income minus business expenses minus corporation tax (19% or 25%) equals available profits. Take a director's salary (typically £12,570 - the personal allowance) with no tax. Remaining profits are dividends taxed at 8.75% (basic), 33.75% (higher), or 39.35% (additional rate).
Q: What corporation tax rates apply for 2025/26?
A: For 2025/26, companies with profits under £50,000 pay 19% corporation tax. Companies with profits over £250,000 pay 25%. Between £50,000-£250,000, marginal relief applies. Most contractors fall into the 19% or 25% bracket depending on their annual contract value.
Q: Can I claim business expenses outside IR35?
A: Yes, outside IR35 you can claim legitimate business expenses including: travel, equipment, software subscriptions, training, professional fees, accountancy costs, workspace costs, and proportionate home office expenses. These reduce your taxable profit before corporation tax, increasing your take-home pay.