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Contractor services
Four providers worth knowing once you know your IR35 position — inside or out.
Umbrella companies
Inside IR35? Brookson and Parasol are two of the most established umbrella providers — transparent margins, same-day setup.
Compare umbrella companies →Contractor accountants
Crunch and SJD are specialist Ltd company accountants — fixed monthly fee, software included, IR35 guidance on tap.
Find an accountant →IR35 insurance
Qdos are the go-to for IR35 tax liability insurance. From £99/year — covers HMRC investigations and any tax owed if caught inside.
Get a Qdos quote →IR35 contract review
Know your status before you sign. A professional review typically costs £99–£150 and gives you a defensible position with HMRC.
Review my contract →What is IR35?
IR35 is the UK tax legislation that determines whether a contractor working through a limited company should be taxed as an employee. If your engagement looks like employment in all but name — same desk, same hours, same manager telling you what to do — HMRC's position is that you should pay tax like an employee.
The rules have been tightened significantly over time. Since April 2021, medium and large private sector clients decide your IR35 status, not you. If they get it wrong and put you inside IR35 incorrectly, you lose income — but you keep none of the employment rights you'd have if you were actually employed. It's one of the more frustrating corners of UK tax law.
Inside vs Outside IR35: What Changes
| Factor | Inside IR35 | Outside IR35 |
|---|---|---|
| Tax treatment | PAYE — taxed like an employee | Ltd company — salary + dividends |
| National Insurance | Employee + employer NI both deducted | Employer NI only on the £12,570 salary |
| Typical take-home | ~55–65% of gross | ~65–75% of gross (reduced since Apr 2025) |
| Dividend income | Not applicable | Taxed at lower dividend rates (10.75–35.75%) |
| Expenses | Very limited | Legitimate business expenses deductible |
| Employment rights | None | None |
April 2026: Dividend Tax Goes Up
From 6 April 2026 the ordinary and upper dividend tax rates each rose by 2 percentage points, to 10.75% and 35.75%. The additional rate stays at 39.35% and the £500 dividend allowance is unchanged. Because most Ltd Co contractors pay themselves mainly in dividends, this trims outside-IR35 take-home pay again. The calculator uses the new rates.
April 2025: What Changed for Contractors
The October 2024 Budget introduced the most significant change to contractor taxation in years. From April 2025, employer National Insurance increased from 13.8% to 15%, and the secondary threshold — the earnings level at which employer NI kicks in — dropped from £9,100 to £5,000.
For Ltd Co contractors taking an optimal salary of £12,570, this means employer NI on that salary rose from roughly £479 to roughly £1,136 per year — a £657 increase that directly reduces take-home pay outside IR35. This calculator already reflects these 2026/27 rates.
How the Calculator Works
The calculator runs two separate scenarios in real time using 2026/27 HMRC rates:
- Inside IR35: Paid through an umbrella company, so employer NI (15% above £5,000) and the 0.5% apprenticeship levy come out of the assignment rate first. Income tax (20%, 40%, 45% depending on band) and employee NI (8% up to £50,270, 2% above) are then applied to the remaining salary. Umbrella margins vary and are not included. The personal allowance tapers above £100k, which this calculator accounts for.
- Outside IR35 (Ltd Co): Optimal salary set at £12,570 (uses the personal allowance in full, avoids income tax on salary). Employer NI at 15% on the salary above £5,000. Remaining profit taken as dividends after corporation tax (19–25% with marginal relief).
How IR35 Status is Decided
The three things HMRC and tribunals look at most closely are:
- Substitution: Can someone else from your company do the work? A genuine right of substitution is strong evidence of being outside IR35.
- Mutuality of Obligation (MOO): Is the client obliged to keep offering you work — and are you obliged to accept it? If yes, that points toward employment.
- Control: Does the client dictate how, when, and where you work? The less control they have over your working methods, the stronger your outside case.
HMRC's CEST tool is a useful starting point but has known gaps — it doesn't properly assess MOO, for instance. If you're unsure, a professional IR35 contract review from a specialist like Qdos is worth the £99–£150 for peace of mind.
2026/27 Tax Rates
| Tax | Rate | Threshold |
|---|---|---|
| Personal Allowance | 0% | Up to £12,570 (tapers above £100k) |
| Basic Rate Income Tax | 20% | £12,571 – £50,270 |
| Higher Rate Income Tax | 40% | £50,271 – £125,140 |
| Additional Rate Income Tax | 45% | Over £125,140 |
| Employee NI (Class 1) | 8% / 2% | £12,570 – £50,270 / above |
| Employer NI (Class 1) | 15% | Above £5,000 (unchanged for 2026/27, confirmed GOV.UK) |
| Corporation Tax (small profits) | 19% | Up to £50,000 profit |
| Corporation Tax (main rate) | 25% | Over £250,000 profit |
| Dividend Allowance | 0% | First £500 |
| Dividend Basic Rate | 10.75% | Up to £50,270 total income |
| Dividend Higher Rate | 35.75% | £50,271 – £125,140 |
| Dividend Additional Rate | 39.35% | Above £125,140 |
Frequently Asked Questions
Is it still worth being outside IR35 after the April 2025 NI changes?
Yes, for most contractors — though the gap has narrowed. The employer NI increase from 13.8% to 15% and the lower £5,000 secondary threshold cost a typical Ltd Co contractor around £600–£800/year compared to 2024/25. That said, a £300/day contractor working 46 weeks still takes home meaningfully more outside IR35 than inside, mainly because dividends are taxed more lightly than salary income.
What happens if my client puts me inside IR35 but I think I'm outside?
You can challenge the Status Determination Statement (SDS) your client issues. They have a legal obligation to respond. If you genuinely believe the determination is wrong, a formal IR35 contract review from an adviser like Qdos or a specialist solicitor can give you a second opinion and, if needed, supporting evidence for a dispute or tax tribunal.
Does going inside IR35 mean I get employee rights?
No — and this is perhaps the most unfair aspect of the legislation. Working inside IR35 means you pay taxes like an employee, but you do not get statutory sick pay, redundancy pay, pension contributions from your client, holiday pay, or any other employment rights. You are still a contractor, just one paying more tax.
What is the best salary for a Ltd Co contractor?
Most contractor accountants recommend a salary equal to the personal allowance (£12,570 in 2026/27). This uses the allowance in full with no income tax, and the employer NI cost — now 15% on earnings above £5,000 — is outweighed by the corporation tax saving on salary costs. Some accountants suggest a lower salary (around £9,100 or even £5,000) to reduce employer NI further, but the optimal point depends on your profit level and whether you have other income. Our calculator uses £12,570 as the default.
Can I use the IR35 calculator if I'm paid a fixed annual fee rather than a day rate?
Yes — just divide your annual fee by 260 (the typical number of UK working days) to get an approximate day rate, or by 52 to get a weekly figure. Alternatively, set days per week to 5 and weeks per year to 46, then enter a day rate that gives you your target annual gross in the summary box.
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