HMRC Off-Payroll Working Reform Guide

UK Inside vs Outside IR35 & Umbrella Pay Calculator

Negotiating a UK contract? Model a take-home-pay difference between an umbrella PAYE scenario and a PSC scenario. IR35 status and the correct payroll treatment depend on the contract and actual working practices.

UK Inside vs Outside IR35 & Umbrella Pay Calculator

HMRC Off-Payroll Working rules: Compare deemed PAYE employment taxes against Ltd Company dividend payouts.

Outside IR35 Advantage

+£3,870 / yr

Advanced PAYE and umbrella reconciliation

Tax regionTax-code allowanceTaxable benefitsAllowable expensesUmbrella £/week Apply 0.5% levy

Pension salary sacrificePercent of umbrella gross payStudent loan planHoliday pay withheldSet 12.07% if accrued, 0 if rolled up Postgraduate loan

Contract Day Rate£500/day

Weeks Worked Per Year44 Weeks

Annual Contract Turnover: £110,000

Inside IR35 (Umbrella PAYE)

59.6% retained

Net Annual Take-Home

£65,543 / yr

~£5,462 / month

Employer NI (15% model):-£13,552

Apprenticeship Levy (0.5%):-£545

PAYE Income Tax & Employee NI:-£29,260

Umbrella Margin Fee:-£1100

Outside IR35 (Ltd Company)

63.1% retained

Net Annual Take-Home

£69,413 / yr

~£5,784 / month

Director Salary (£12,570):Illustrative salary

UK Corporation Tax (19%-25%):-£21,406

Dividend Surcharge:-£16,681

Illustrative Difference:+£3,870

Contractor note: Status depends on actual working practices. The 2026/27 model now supports pension salary sacrifice, Plans 1/2/4/5, postgraduate loans and accrued holiday pay. Accrued holiday is deferred cash rather than tax and should be set to 0 when rolled up. Benefits, tax codes, Scottish rates, employment costs and umbrella-specific reconciliation can still differ.

How IR35 Directly Affects Your Contractor Retention

The Inside IR35 Tax Hit

This illustration models 2026/27 employer NI at 15% above the secondary threshold, employee NI at 8%/2%, PAYE and a 0.5% levy assumption. Actual umbrella reconciliation, holiday pay, pension, expenses and employer levy treatment vary.

The Outside IR35 Dividend Route

A genuinely outside-IR35 engagement may be operated through a company, subject to status, company-tax, payroll, dividend and expense rules. The modeled salary/dividend mix is illustrative and is not automatically optimal or available.