What income tax do I pay inside IR35?

Your deemed salary is taxed under the standard income tax bands. For 2026/27: no tax on the first £12,570 (personal allowance), 20% on £12,571–£50,270 (basic rate), 40% on £50,271–£125,140 (higher rate), and 45% above £125,140 (additional rate). Your personal allowance is also tapered if your deemed salary exceeds £100,000.

What employee NI do I pay inside IR35?

Employee NI for 2026/27 is 8% on earnings between £12,570 and £50,270, and 2% on earnings above £50,270. These rates apply to your deemed salary, not the gross contract value. Employer NI has already been deducted before employee NI is calculated.

Can I claim expenses inside IR35?

The 5% deemed business expenses allowance was abolished for most private-sector contractors from April 2021 following off-payroll reforms. You can only claim expenses that a regular employee could claim, primarily travel to temporary workplaces under HMRC's 24-month rule. Home-to-work travel and most business expenses are not claimable inside IR35.

Is this calculator accurate for 2026/27?

Yes. This calculator uses 2026/27 HMRC rates: employer NI at 15% above £5,000, personal allowance of £12,570, basic rate 20% on £12,570–£50,270, higher rate 40% on £50,270+, employee NI at 8% on £12,570–£50,270 and 2% above. Results are estimates, your actual liability depends on other income sources and allowable deductions.

What is the effective deduction rate inside IR35?

For a typical £400–£600/day contractor (£88,000–£132,000 gross), the effective deduction rate inside IR35 is roughly 38–42% of gross contract value (38.2% at £88,000 and 42.4% at £132,000 on 2026/27 rates). This is higher than a standard employee's effective rate because employer NI (15% above £5,000) is funded from the contractor's gross income rather than being an additional cost to a client.

Updated 6 April 2026

Inside IR35 Calculator · Deemed Salary & Net Pay 2026/27

Calculate your deemed employment income and net take-home pay when working inside IR35. Uses HMRC 2026/27 employer NI, income tax and employee NI rates.

✓ Free to use✓ Updated 2026/27✓ HMRC aligned✓ Instant results

Inside IR35 Calculator

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2026/27 rates. The employer NI is deducted from the gross contract value before the deemed salary is calculated. Results are estimates, consult a tax adviser for your specific situation.

How Deemed Salary is Calculated Inside IR35

Quick Answer: Inside IR35, your net take-home = Gross contract income − employer NI (15% above £5,000) − income tax − employee NI. On £110,000 gross (£500/day, 220 days), this is £65,222.40 net, around 41% in total deductions. The same contract outside IR35 (salary + dividends) would net about £70,057, so the outside advantage is roughly £5,000–£6,000 a year.

What is Deemed Salary?

When you work inside IR35, HMRC requires your fee-payer (the client or agency) to apply PAYE. Your gross contract income is first reduced by employer National Insurance contributions, this is the deemed salary. Employer NI for 2026/27 is 15% on income above the £5,000 secondary threshold. Crucially, unlike a regular employee, you fund the employer NI yourself, it comes out of your gross fees, not from an employer on top of your pay.

Formula

Deemed salary = Gross contract value − (Gross − £5,000) × 15%

e.g. £110,000 gross: employer NI = (£110,000 − £5,000) × 15% = £15,750 → deemed salary = £94,250

Worked Example, £500/day, 220 days

Gross contract value (£500 × 220)£110,000.00

Less employer NI (15% above £5,000)−£15,750.00

Deemed employment income£94,250.00

Less income tax (20% + 40% bands)−£25,132.00

Less employee NI (8% + 2% bands)−£3,895.60

Net take-home£65,222.40

Effective deduction rate40.7%

All figures use 2026/27 HMRC rates. Personal allowance £12,570. A typical £25/week umbrella margin reduces net take-home to about £63,922. The same contract outside IR35 would net about £70,057, see our IR35 Calculator for the full comparison.

Frequently Asked Questions

Deemed salary = gross contract income − employer NI. For 2026/27, employer NI is 15% on earnings above the £5,000 secondary threshold. So on £100,000 gross: employer NI = (£100,000 − £5,000) × 15% = £14,250. Deemed salary = £85,750. Income tax and employee NI are then applied to this deemed salary exactly as they would be for an employee.