Inside vs Outside IR35 Explained
Understand the difference between inside and outside IR35, and how it affects your take-home pay as a contractor.
What is IR35?
IR35 is UK tax legislation designed to identify contractors who would be employees if not for the intermediary (their limited company). If your contract is “inside IR35”, you pay tax and NI as if you were an employee.
Inside vs outside IR35
| Factor | Inside IR35 | Outside IR35 |
|---|---|---|
| Tax treatment | Employee-like | Limited company |
| How you pay yourself | Deemed salary | Salary + dividends |
| Employer’s NI | Deducted from your gross | Not applicable |
| Take-home pay | Lower | Higher |
| Who decides? | Client (medium/large) | Client (medium/large) |
Take-home pay comparison
On a £450/day rate working 230 days/year:
- Outside IR35: Estimated take-home ~£78,500/year
- Inside IR35: Estimated take-home ~£65,500/year
- Equivalent PAYE: Take-home ~£70,000/year
The exact figures depend on your expenses, pension, and personal circumstances. Use our Contractor Calculator for a personalised comparison.
How is IR35 status determined?
Since April 2021, medium and large private sector clients are responsible for determining IR35 status. Key factors include control over how work is done, whether you provide a personal service, and whether there is mutuality of obligation.
Try the calculator
Use our Contractor Calculator to compare take-home pay inside and outside IR35.
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Last updated
Last reviewed: 2026-04-12T07:27:44.642Z.