About this calculator ▼
From April 2021, medium and large engagers (end-clients) are responsible for assessing IR35 status. If ruled inside IR35, the contractor is treated as a deemed employee — paying Income Tax and NICs through PAYE without the benefits of employment.
Outside IR35 contractors can pay themselves a small salary and take the remainder as dividends, significantly reducing their tax bill. The difference is typically £8,000–£25,000/year at standard contracting rates.
Frequently asked questions
What is IR35 and who does it affect?▼
IR35 is HMRC's off-payroll working rules designed to prevent tax avoidance by contractors who work like employees but operate through a limited company (Personal Service Company). If your contract is caught by IR35, you pay broadly the same tax as a permanent employee on that income, losing the tax advantages of the PSC structure.
How do I know if I am inside or outside IR35?▼
The three main tests are: Substitution (can you send someone else to do the work?), Control (does the client dictate how, when and where you work?), and Mutuality of Obligation (are you obliged to accept work and they obliged to offer it?). If you have genuine substitution rights, low control, and no mutuality, you are likely outside IR35.
Who is responsible for determining IR35 status?▼
Since April 2021, for medium and large private sector clients, the end client (not the contractor) is responsible for determining IR35 status and issuing a Status Determination Statement (SDS). For small private sector clients and all public sector engagements, slightly different rules apply. Sole traders operating without a PSC are not affected by IR35.
What is the tax difference between inside and outside IR35?▼
Outside IR35, a contractor can pay themselves a low salary and take dividends, significantly reducing Income Tax and NIC liability. Inside IR35, the deemed payment rules mean the client deducts PAYE and NICs as if you were an employee, resulting in a materially higher tax bill — often 20–25% more tax on the same contract income.
Can I appeal an IR35 determination?▼
Yes. Since April 2021, end clients must provide an SDS and operate a client-led disagreement process. You can challenge the determination, and if you believe it is incorrect, you can also raise a dispute via HMRC's Check Employment Status for Tax (CEST) tool and seek independent review.