IR35 Take-Home Pay: Inside vs Outside
How IR35 status affects your annual take-home pay — with worked examples at multiple day rates for 2026/27.
Last updated: April 2026
Why IR35 Status Affects Take-Home Pay
When you are outside IR35, you can operate through a limited company and withdraw income as a combination of salary and dividends. Dividends are taxed at lower rates than employment income and are not subject to NI — allowing significantly higher net pay from the same contract rate.
When you are inside IR35 (via umbrella or deemed salary), all income is treated as employment income: subject to full income tax and employee NI, plus employer NI is deducted from your assignment rate before you ever see it. The result is a substantially lower take-home figure.
Estimated Annual Take-Home by Status (2026/27)
48 weeks, 5 days/week. Outside IR35 assumes salary + dividends via limited company. Umbrella assumes £25/week margin, 3% pension, no student loan. All figures approximate.
| Day Rate | Outside IR35 (Ltd) | Inside IR35 (Umbrella) | Inside IR35 (PAYE) | Difference |
|---|---|---|---|---|
| £300/day | ~£34,000 | ~£26,500 | ~£26,000 | −£7,500 |
| £400/day | ~£42,000 | ~£33,500 | ~£33,000 | −£8,500 |
| £500/day | ~£51,000 | ~£41,000 | ~£40,500 | −£10,000 |
| £600/day | ~£59,000 | ~£48,500 | ~£48,000 | −£10,500 |
| £700/day | ~£67,000 | ~£55,500 | ~£55,000 | −£11,500 |
Outside IR35 figures are illustrative estimates based on optimal salary/dividend split. Actual figures depend on accountant fees, dividends tax changes, and personal circumstances.
Inside IR35: Umbrella vs Limited Company
When a contract is inside IR35, choosing between an umbrella company and a limited company makes little difference to your net pay — both are taxed under PAYE. However:
- Umbrella: No admin, no accounts, no Companies House filings. Lower running cost but you have no separate legal entity.
- Limited company inside IR35: You still have company overhead (accountant, filings) but no tax benefit. Generally not recommended unless you have other business income outside the caught contract.
For most contractors caught by IR35, umbrella is the simpler and cheaper route.
Calculate Your Inside IR35 Pay
Enter your day rate to get your exact umbrella take-home using 2026/27 rates.
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