Inside vs outside IR35, in take-home terms
The status changes how your contract income is taxed. Inside IR35 it is taxed like a salary. Outside IR35 you can run it through your own company, taking a small salary plus dividends.
Worked example. At £300/day over 220 days (£66,000), outside IR35 nets about £50,540 versus £48,837 inside, roughly £1,703 more a year. The gap narrows, and can reverse, at higher day rates as dividends move into the higher rate.
How the outside figure is built
- £12,570 salary, covered by the personal allowance, so no income tax or NI on it.
- Corporation tax on the remaining company profit.
- Dividends of what is left, taxed at 8.75% / 33.75% / 39.35% after the £500 allowance.
This is a simplified annual comparison. It assumes a sole director, no expenses, no pension, and no employer NI. Your real position depends on your contract and company setup.
Source: gov.uk understanding off-payroll working (IR35). This is an estimate, not tax advice.