Inside IR35 Calculator

An assignment rate is not a wage. It is the price the agency pays the umbrella for supplying you, and it is meant to cover the entire cost of employing you. gov.uk lists what comes out of it before your gross pay is set, in this order: the umbrella company’s operating costs, employer National Insurance, employer workplace pension, holiday pay, and the Apprenticeship Levy where it applies. Only what survives that list is gross pay, and only then do income tax and employee National Insurance apply.

Here is the part that makes this arithmetic harder than it looks, and the reason published figures disagree. Employer National Insurance and the Apprenticeship Levy are charged on gross pay — but gross pay is the thing you are trying to find. You cannot take 15% of the assignment rate, because that is not the base HMRC charges. What is true is that the pot left after the margin has to satisfy an equation:

Above the £5,000 Secondary Threshold that inverts to gross = (pot + 750) ÷ 1.155, where the 750 is the threshold relief and the 1.155 is one plus the employer NI and levy rates. This calculator solves it numerically rather than hardcoding 1.155, so it stays correct if a Budget moves the threshold or you add a pension percentage.

Take £500 a day over 220 billable days. The assignment is £110,000.00. A £25 a week margin takes £1,300.00, leaving £108,700.00 to cover both gross pay and the employment costs charged on it. Solving gives gross pay of £94,761.90, employer National Insurance of £13,464.29 and an Apprenticeship Levy of £473.81. Add those four numbers back together and you get £110,000.00 — the assignment rate, to the penny. That closing check is the whole point: get the inversion wrong and it will not close.

Notice what employer National Insurance actually comes to as a share of gross pay: 14.21%, not 15%, because the first £5,000 of gross carries no secondary contribution. If an umbrella illustration shows employer NI at exactly 15% of gross, it has dropped the Secondary Threshold relief and is charging you £750.00 too much.

She keeps 59.6p of every pound of her assignment rate. The part that surprises people is not the income tax — it is the £13,938.10 of employment cost that never appears as income anywhere on her payslip, because it is deducted before gross pay is set. Her contract is worth £110,000; the number that belongs next to a permanent salary offer is the £94,761.90 gross.

The honest permanent-equivalent of Tom's rate is £66,415.58, not the £77,000 headline. That is why a contract that looks like £77,000 can lose to a £70,000 permanent role once an employer pension above the auto-enrolment minimum, paid sick leave and notice protection are priced in — none of which he gets from the end client.

Dan's gross of £142,155.84 is past £125,140, so his Personal Allowance is £0.00 and his retention falls to 52.8p. Everything he earned between £100,000 and £125,140 of gross was taxed at a 62% marginal rate — 60% income tax as the allowance withdrew, plus 2% National Insurance — which is the single strongest argument for the pension route below.

Take-home cash falls by £2,280.57 and the pension pot gains £4,541.49 — about 2.0 times the cash given up. The sacrifice comes out of the pot before employer NI and the levy are calculated, so it escapes 15% plus 0.5% of employment cost as well as 40% income tax and 2% employee NI. Total value rises from £65,519.30 to £67,780.22.

Inside pays £65,519.30 and outside pays £69,223.64 — a gap of £3,704.34, or 5.7%. That is far narrower than contractor folklore assumes, because dividend rates rose to 10.75% and 35.75% for 2026/27 and Corporation Tax bites at an effective 22.5% in the Marginal Relief band.

Why Corporation Tax is neither 19% nor 25%

A one-person consultancy almost always lands between the two published rates. Profits up to £50,000 are charged at 19% and profits above £250,000 at 25%, but in between Marginal Relief tapers the main rate down. HMRC’s formula reduces the main-rate charge by the standard fraction of 3/200 multiplied by the distance from the upper limit. On £94,794.50 of profit that is £23,698.63 less £2,328.08, giving £21,370.54 — an effective 22.5%. The rate that actually matters for a decision is neither of these: each extra pound of profit inside the band is taxed at 26.5%, which is why bringing a pension contribution or a genuine business cost forward into a profitable year is worth more than the headline rate suggests.

What one more pound of assignment rate is worth

The figure that should drive a rate negotiation is not the average deduction but the marginal one: how much of the next pound you actually keep. Two effects compound. The extra pound has to carry employer National Insurance and the Apprenticeship Levy before it becomes gross pay, and the gross pay is then taxed at your marginal rate.

Inside the Personal Allowance taper an extra pound of assignment rate is worth about 32.9p in the hand — less than it is worth to a contractor on half the rate. That is the arithmetic behind every experienced contractor’s instinct to push a rate rise into a pension rather than a payslip once they are near £100,000.

Route A: employed by an umbrella company

You become a genuine employee of the umbrella, with a contract of employment, statutory holiday, statutory sick pay, pension auto-enrolment and continuity of employment across assignments. The agency pays the umbrella an assignment rate; the umbrella strips its employment costs out of it and runs PAYE on what is left, including any student loan. This is the default the calculator above models, and it is what the overwhelming majority of inside-IR35 traffic is really asking about.

Route B: your own company, paid a deemed employment payment

You keep your limited company, but the client has issued a Status Determination Statement putting the engagement inside IR35 under the Chapter 10 off-payroll rules. The deemed employer — usually the agency closest to your company in the chain — deducts income tax and employee National Insurance from your fee before paying it over, and pays employer National Insurance and the Apprenticeship Levy to HMRC. Two consequences follow that most pages get wrong. Student and postgraduate loan repayments are not deducted by the deemed employer, so they fall to Self Assessment; and the money arrives in your company already taxed, so it can be drawn out without further personal tax.

What changed on 6 April 2026

From 6 April 2026, responsibility for making sure PAYE is operated correctly on umbrella workers’ pay sits with the recruitment agency that supplies the worker, or with the end client where no agency is involved. HMRC can recover underpaid PAYE from them rather than pursuing only the umbrella. The umbrella still runs the payroll day to day, and — this is the part worth stating plainly because no competing page does — your payslip arithmetic is unchanged. The same deductions apply in the same order and produce the same net pay as before. What moved is the liability when an umbrella takes tax from your pay and does not hand it to HMRC, which is exactly how workers ended up carrying losses in the disguised remuneration schemes of the last decade.

Every statutory figure on this page is set by HM Revenue & Customs and applies across the United Kingdom. HMRC’s guidance on working through an umbrella company, as of 17 September 2025, sets the legal order of deductions. Its rates and thresholds for employers 2026 to 2027 give the 15% secondary rate, the £5,000 Secondary Threshold and the 0.5% Apprenticeship Levy. The Department for Business and Trade sets the 12.07% rolled-up holiday pay rule. HM Treasury put the scale of the umbrella market at roughly 700,000 workers when it published its November 2025 policy paper on umbrella company non-compliance, costing the resulting PAYE changes at £715 million for 2026 to 2027.

Scotland is a sub-jurisdiction here rather than a separate authority, and the distinction is easy to get wrong. Scottish taxpayers pay Scottish income tax rates on employment income — six bands running from 19% to 48% — but UK-wide rates on dividends. So the Scottish setting on this calculator changes the income tax on umbrella gross pay and leaves the dividend leg of the outside-IR35 comparison alone. At £500 a day the difference is real: a Scottish umbrella contractor takes home £62,481.16 against £65,519.30 elsewhere in the UK, a gap of £3,038.15 a year. National Insurance, employer National Insurance and the Apprenticeship Levy are not devolved and are identical everywhere.

One document is worth more to you than any calculator, including this one. Since 6 April 2020, regulation 13A of the Conduct of Employment Agencies and Employment Businesses Regulations 2003 has required an agency to give every agency worker a Key Information Document before terms are agreed, with a dedicated annex where an umbrella is involved. It states the assignment rate, the margin and the deductions you should expect. Enforcement passed from the Employment Agency Standards Inspectorate to the Fair Work Agency on 7 April 2026. Reconcile this page’s output against your Key Information Document and against HMRC’s own “Work out pay from an umbrella company” tool, and you will know within ten minutes whether your payslip is right.

How much is £500 a day inside IR35?

About £65,519 a year, or £5,459.94 a month, working 220 billable days through an umbrella company with a £25 a week margin in 2026/27. That is 59.6% of the £110,000 assignment. The order matters: £13,464.29 of employer National Insurance, £473.81 of Apprenticeship Levy and £1,300.00 of margin come off the assignment rate first, leaving £94,761.90 of gross pay. Income tax of £25,336.76 and employee National Insurance of £3,905.84 then come off that. Two inputs move the answer more than anything else: billable days, because 200 days rather than 220 removes £10,000 of assignment income before any tax is considered, and a pension sacrifice, which changes the answer more than shopping around for a cheaper margin ever will.

How much should I increase my rate for an inside-IR35 contract?

Between about 3% and 15.1% on 2026/27 numbers, depending where your rate sits — not the 20% to 30% still repeated on contractor forums. Matching a £500 a day outside-IR35 take-home needs about £537 a day inside. The uplift does not fall smoothly as the rate rises: it is largest where the umbrella side has just crossed a tax threshold that the limited company side has not, which happens around £300 a day and again around £600 a day. The old rule of thumb assumed 19% Corporation Tax and much lower dividend rates, and both changed. Ask for the number your own rate actually implies rather than a round percentage, and bring the arithmetic.

Why is employer's National Insurance taken out of my day rate?

Because the assignment rate an agency pays an umbrella is meant to cover the whole cost of employing you, not your wages. gov.uk lists what comes out of it before your gross pay is set: the umbrella's operating costs or margin, employer National Insurance, employer pension, holiday pay, and the Apprenticeship Levy where it applies. Every one of those is a genuine employment cost that a permanent employer would carry separately on top of a salary. What is not legitimate is seeing employer National Insurance or an employer pension contribution listed below the gross pay line on your payslip. HMRC's guidance is blunt about it: the National Insurance and pension contributions taken off your gross pay should always be employee contributions, not employer. If yours are not, that is a compliance problem worth raising.

What changed for umbrella companies on 6 April 2026?

Legal responsibility for operating PAYE moved up the supply chain to the recruitment agency that supplies you, or to the end client where there is no agency. HMRC can now recover unpaid PAYE from them rather than pursuing only the umbrella. In practice the umbrella still runs the payroll and still issues your payslip, so nothing about the arithmetic on this page changed: the same deductions in the same order produce the same net pay before and after the reform. What changed is who carries the liability when an umbrella collects tax and fails to pay it over — historically the loss that landed on workers caught in disguised remuneration schemes. HM Treasury costed the measure at £715 million for 2026 to 2027, which is a fair indication of how much was going missing.

Is an umbrella or a limited company better if I'm inside IR35?

If the contract is genuinely inside IR35, a limited company buys you almost nothing. The deemed employment payment is taxed like employment income anyway, and you keep the accountancy fees, the filing deadlines and the Companies House obligations without the tax treatment that made them worth paying for. The limited company route only pays on genuinely outside contracts. Even there the advantage is smaller than most contractors expect: on the same £110,000 of contract value this page makes it £3,704.34 a year, about 5.7%. The one real argument for keeping a dormant company open through an inside-IR35 stint is optionality, not tax: it is there when the next outside contract appears.

What is a reasonable umbrella company margin?

There is no statutory figure, because the margin is a commercial fee rather than a rate — which is why it is an editable input here with a disclosed default rather than a fixed number. Published figures cluster between £15 and £35 a week: Parasol quotes a £15 average in its own calculator assumptions, and other providers quote up to £35. It should be a flat weekly fee rather than a percentage of your rate, and it must appear in the Key Information Document your agency gives you before you agree terms. Keep it in proportion: at £25 a week it is £1,300.00 a year, or 1.2% of a £500 a day assignment — the smallest deduction on this page and smaller than the employer NI difference between two umbrellas' payroll accuracy.

Do I get holiday pay through an umbrella company?

Yes, and it is already inside your assignment rate rather than added to it. You are a genuine employee of the umbrella, so you are entitled to 5.6 weeks of statutory leave. For irregular-hours and part-year workers — which describes most contractors — the umbrella may roll that up and pay 12.07% of pay in each period, clearly marked as a separate item on the payslip, for leave years starting on or after 1 April 2024. The practical consequence is a cash-flow one that catches people out every year: if your holiday pay is rolled up, you have already been paid for your leave, so a week off is a week with no invoice and no income. On £94,761.90 of gross the holiday element is £10,205.91, which is roughly £1,822.48 for each week of leave you take.

Are student loan repayments deducted inside IR35?

It depends which route you are on, and this is one of the few places where the two genuinely differ. Through an umbrella you are an employee, so 9% of earnings above your plan threshold — 6% for a Postgraduate Loan — comes out through PAYE automatically, alongside income tax and National Insurance. Through your own limited company on a deemed employment payment, no deduction is made: gov.uk states that student and postgraduate loan repayments are not deducted by the deemed employer, so you settle them through Self Assessment instead. The liability is identical; only the timing changes. The trap is budgeting against the better-looking monthly figure and then meeting a Self Assessment bill in January that includes a full year of repayments you have already spent.

Can I still contribute to a pension inside IR35?

Yes, and it is the most effective lever left to you. A contribution made through the umbrella comes out of the assignment rate before employer National Insurance and the Apprenticeship Levy are calculated, so it escapes 15% plus 0.5% of employment cost on top of the usual income tax and employee National Insurance relief. At £500 a day a 5% sacrifice costs £2,280.57 of take-home cash and puts £4,541.49 into the pot — roughly 2.0 times the cash given up. It is worth more again between £100,000 and £125,140 of gross, where the Personal Allowance taper makes the marginal rate 62%: at £750 a day the same 5% costs £3,126.25 and gains £6,812.86.

How do I check my umbrella payslip is correct?

Start with the Key Information Document your agency must give you before you agree terms, which sets out the assignment rate, the margin and the deductions you should expect. Then reconcile a payslip against it. The red flag is placement rather than size: employer National Insurance or an employer pension contribution appearing below the gross pay line means employment costs are being taken twice, once above the line and once as if they were yours. HMRC also publishes its own checker, "Work out pay from an umbrella company", which is the authoritative second opinion for a single current-year role. Reconciling this page's figures against both is a ten-minute job that has recovered real money for people who did it.

Who decides whether I'm inside IR35?

For public sector clients and medium or large private ones, the client decides and must give you a Status Determination Statement setting out its reasoning, which you can dispute. Where the end client is a small private business the responsibility stays with your own company under the older Chapter 8 rules, and you make the assessment yourself. gov.uk's small-company test is failing two or more of three conditions: turnover over £10,200,000, balance sheet total over £5,100,000, and more than 50 employees. Worth knowing before you accept a determination: a blanket policy applied across a whole contractor population without looking at individual working practices is not a valid determination, and the client is required to take reasonable care.

Does being inside IR35 make me an employee with employment rights?

Inside IR35 is a tax status, not an employment-law status. Being taxed like an employee of the end client does not give you unfair dismissal protection, redundancy pay or a right to return from leave with them — which is the asymmetry contractors reasonably find infuriating. Through an umbrella the picture is different, because you genuinely are an employee of the umbrella company: statutory holiday, statutory sick pay, pension auto-enrolment, notice and continuity of employment all come from it. That is a real difference between the two inside-IR35 routes and a point in the umbrella's favour that the tax arithmetic on this page does not capture.