IR35 Status Checker & Off-Payroll Tax Calculator
Two tools in one. First, a CEST-style questionnaire assesses whether your contract is likely inside or outside IR35 based on substitution, control, mutuality of obligation, and five supporting factors. Then compare your take-home pay inside vs outside IR35 for 2025/26 or 2026/27 — with a full breakdown of income tax, National Insurance, corporation tax, and dividend tax.
Answer 8 questions based on your working arrangement. Based on HMRC’s Employment Status Manual and the Ready Mixed Concrete “irreducible minimum” test (substitution, control, mutuality of obligation), refined by Autoclenz v Belcher and HMRC v Atholl House. Guidance only — not a legal determination.
1. Right of substitution
If you cannot work one week (holiday, illness), can you send a qualified substitute at your own cost without the client rejecting them personally?
2. Control over how the work is done
Who decides how, when, and where the work is performed? A genuine contractor typically has autonomy over method.
3. Mutuality of obligation (MOO)
Is the engagement a one-off deliverable, or an ongoing relationship where the client is expected to provide work and you are expected to accept it?
4. Financial risk
Do you bear real financial risk — e.g. fixing defective work at your own cost, fixed-price contracts, unpaid invoicing delays?
5. Equipment and tools
Do you bring your own significant equipment (laptop, software licences, specialist tools)?
6. Integration ("part and parcel")
Are you integrated into the client’s organisation — internal title, staff lists, line-managing employees, attending internal meetings?
7. Multiple clients
Do you work for other clients at the same time, or have you done so recently?
8. Business on own account
Do you run a real business — own PI insurance, website, marketing, accounts, a history of different clients?
Step 2 — Financial impact: inside vs outside IR35
Once you’ve assessed your likely status above, enter your day rate to see the take-home difference. The calculator assumes a director salary at the Personal Allowance (£12,570) plus dividends for the outside-IR35 case, and PAYE + employer’s NI + 5% flat deduction for the inside-IR35 case.
Your contract day rate (excl. VAT)
Typical contractors work 220 days per year
Outside IR35 only — legitimate business costs (equipment, training, professional fees). Not applicable inside IR35 where a flat 5% deduction applies instead.
Estimated annual saving by working Outside IR35
£9,027
Based on £110,000 gross annual contract income
Treated as deemed employee — PAYE applies
Effective rate: 38.2%
Genuine business — salary + dividends structure
Effective rate: 35.0%
| Item | Inside IR35 | Outside IR35 |
|---|---|---|
| Gross Contract Income | £110,000.00 | £110,000.00 |
| Allowable Expenses / 5% Deduction | −£5,500.00 | — |
| Director Salary | — | £12,570.00 |
| Corporation Tax | — | −£21,768.04 |
| Income Tax | −£23,262.00 | — |
| Employee National Insurance | −£3,802.10 | — |
| Employer National Insurance | −£14,925.00 | −£1,135.50 |
| Dividend Tax | — | −£15,558.93 |
| Take-Home Pay | £62,511 | £71,538 |
| Effective tax rate | 38.2% | 35.0% |
Gross Contract Income
Inside
£110,000.00
Outside
£110,000.00
Allowable Expenses / 5% Deduction
Inside
−£5,500.00
Outside
—
Director Salary
Inside
—
Outside
£12,570.00
Corporation Tax
Inside
—
Outside
−£21,768.04
Income Tax
Inside
−£23,262.00
Outside
—
Employee National Insurance
Inside
−£3,802.10
Outside
—
Employer National Insurance
Inside
−£14,925.00
Outside
−£1,135.50
Dividend Tax
Inside
—
Outside
−£15,558.93
Take-Home Pay
Inside
£62,511
Outside
£71,538
How Does IR35 Work?
IR35 — formally the off-payroll working rules — determines whether a contractor working through a limited company (often called a Personal Service Company, or PSC) is treated as an employee for tax purposes. HMRC introduced the rules to prevent what it describes as "disguised employment", where contractors take home significantly more than employees doing equivalent work simply by structuring income through a company.
The key test is the nature of the working relationship: control, substitution, and mutuality of obligation. If you work under the client's direction, cannot send a substitute, and are expected to be available continuously, you are likely inside IR35.
Inside IR35: Deemed Employment
Inside IR35, the fee-payer (your client or agency) deducts income tax and employee National Insurance from your contract income under PAYE before paying your company. A 5% flat-rate deduction is allowed for general expenses. Employer's National Insurance (currently 15% from April 2025 on income above £5,000) is also subtracted from the gross contract value. The result is a tax burden very similar to direct employment — typically 40–50% of gross contract income.
Outside IR35: Business Structure
Outside IR35, your limited company receives the full contract income. The most tax-efficient approach is to pay yourself a small director's salary (typically the Personal Allowance of £12,570 so no income tax is due) and draw the remaining post-corporation-tax profit as dividends. Dividends are taxed at lower rates and there is no employer's NI on dividends, resulting in meaningfully higher take-home pay — often £8,000–£20,000 more per year at typical contractor rates.
Who Determines IR35 Status?
Since April 2021, medium and large private-sector clients (and all public-sector clients) are responsible for determining IR35 status and issuing a Status Determination Statement (SDS). Small private-sector clients are exempt and contractors may self-determine. HMRC's CEST (Check Employment Status for Tax) tool provides guidance but is not legally binding — the final determination rests with HMRC and the courts.
Frequently asked questions
What is IR35?
IR35 (also called the off-payroll working rules) is UK tax legislation that determines whether a contractor working through a limited company should be treated as an employee for tax purposes. If the working arrangement resembles employment, the contractor is deemed to be inside IR35.
What happens when you're inside IR35?
Inside IR35, income tax and National Insurance are deducted at source under PAYE. A 5% flat deduction is allowed for expenses, and employer's NI (15% from April 2025) is also deducted from the contract value. You cannot draw dividends from inside-IR35 income — your take-home pay is comparable to an employee on the same gross salary.
What happens when you're outside IR35?
Outside IR35, you take a small director's salary (typically £12,570 to stay within your Personal Allowance) and draw the post-corporation-tax profit as dividends. Dividend tax rates (8.75%/33.75%/39.35%) are lower than income tax rates, and there is no employer's NI on dividends — producing significantly higher take-home pay.
Who decides IR35 status?
Since April 2021, medium and large private-sector clients (and all public-sector clients) determine IR35 status and issue a Status Determination Statement (SDS). Small private-sector companies are exempt, allowing contractors to self-determine. HMRC's CEST tool can assist with assessment.
What is the 5% flat-rate deduction inside IR35?
Inside IR35, HMRC permits a 5% deduction from gross contract income to cover the general overhead of running your limited company — accountancy fees, insurance, and other legitimate running costs. This is deducted before calculating your deemed employment income and therefore reduces your PAYE liability.
How does corporation tax work outside IR35?
Outside IR35, your company pays Corporation Tax on profits after deducting salary, employer's NI, and allowable expenses. Profits up to £50,000 are taxed at 19% (small profits rate). Between £50,000 and £250,000, marginal relief applies. Above £250,000, the main rate of 25% applies. Post-tax profits are available as dividends.
Sources
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