IR35 Calculator UK 2025–26
Compare your estimated take-home pay inside vs outside IR35 for 2025–26. This calculator shows the financial impact only — remember that IR35 status is determined by your working practices, not by which outcome is more tax-efficient.
IR35 and the off-payroll working rules
IR35 was introduced in April 2000 by HMRC to combat "disguised employment" — situations where workers operated through personal service companies to pay less tax than equivalent employees, despite working in a substantively similar way. The rules have been significantly strengthened through the Off-Payroll Working legislation of 2017 (public sector) and 2021 (private sector).
The financial difference between inside and outside IR35 can be substantial. Outside IR35, a contractor operating through a limited company can draw a small salary (minimising NI) and extract remaining post-tax profit as dividends, which are taxed at lower rates. Inside IR35, the full turnover (minus a 5% allowance, which HMRC has proposed removing) is treated as employment income, subject to PAYE income tax and both employee and employer National Insurance.
For a contractor with £100,000 turnover, the difference between inside and outside IR35 can be £15,000–£25,000 per year in additional tax, depending on circumstances. This calculator provides a simplified estimate to illustrate the scale of the difference.
The key determinants of IR35 status are the three classic employment tests: substitution (can the contractor send a genuine substitute to do the work?), control (does the client control the manner of work, not just the outcome?), and mutuality of obligation (is there an expectation of ongoing work on both sides?). Beyond these, HMRC also considers whether the contractor is in business on their own account — having multiple clients, financial risk, their own equipment, and so on.
HMRC's Check Employment Status for Tax (CEST) tool is available online and provides a determination for a set of questions about working practices. However, CEST has been criticised for not handling all scenarios well, and courts have found that its output can be misleading. Specialist IR35 advice from an employment lawyer or tax adviser is strongly recommended for any contractor whose status is genuinely ambiguous.
Since April 2021, medium and large private sector engagers are responsible for assessing IR35 status and providing a Status Determination Statement to the contractor. The financial liability for incorrect determinations can fall on the end client. Many large clients took a risk-averse approach and blanket-assessed all contractors as inside IR35 — a position that is legally and commercially challengeable where the facts support outside status.
Frequently asked questions
What is IR35?
IR35 is a set of off-payroll working rules introduced in 2000. They are designed to ensure that contractors who work in a way that is similar to employees pay broadly the same tax as employees. If HMRC determines that your working arrangements would constitute employment if there were no intermediary company, you are "inside IR35" and subject to PAYE-equivalent taxation.
How is IR35 status determined?
IR35 status is based on working practices, not financial preference. The three key tests are: substitution (can you send a substitute to do your work?), control (does the client control how, when, and where you work?), and mutuality of obligation (is there an expectation of ongoing work?). HMRC's Check Employment Status for Tax (CEST) tool provides guidance, though its output is not legally binding.
Who determines IR35 status?
Since April 2021, medium and large private sector clients are responsible for determining IR35 status and issuing a Status Determination Statement (SDS). Small private sector clients (meeting at least two of: turnover below £10.2m, balance sheet below £5.1m, fewer than 50 employees) pass the responsibility back to the contractor's intermediary.
What are the main assumptions in this calculator?
This calculator uses a simplified model. For outside IR35: a salary of £12,570 (to use the full Personal Allowance with minimal NI), business expenses of £3,000, and remaining profit distributed as dividends after 19% corporation tax on the first £50,000 and 25% above. For inside IR35: 95% of turnover is treated as deemed salary (5% is allowed for expenses under the old rules), with full PAYE income tax, employee NI, and employer NI applied. Real-world calculations are more complex.
Can I appeal an inside IR35 determination?
Yes. If you receive an SDS that places you inside IR35, you can formally disagree through the client's dispute resolution process. You should provide evidence supporting outside IR35 status — contract terms, working practice evidence, substitution clauses. If the client does not respond within 45 days, they lose protection against liability for any unpaid tax. A specialist IR35 employment lawyer or tax adviser can assist with appeals.
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This calculator provides estimates only. Results are based on the 2025–26 tax year. Credibrate is not a tax adviser. For personalised advice speak to a qualified accountant.