£1,200 a day inside and outside IR35

Where £264,000 goes inside IR35

The umbrella company takes its costs out of the day rate before it pays you a salary through PAYE.

Where £264,000 goes outside IR35

Your company pays you a £12,570 salary, pays Corporation Tax on the profit and pays out what is left as dividends.

£1,200 a day by days worked

Take-home per year. Fewer billable days means less income but also a smaller share lost to higher-rate tax.

What permanent salary this is worth

An employee would need a salary of about £228,269 to match the inside IR35 take-home, and about £229,887 to match outside IR35. That ignores holiday pay, sick pay and employer pension, which a permanent job adds on top.

The £100,000 trap inside IR35

Your umbrella salary of £228,268 is over £100,000, so you lose £1 of Personal Allowance for every £2 above it. Paying into a pension through the umbrella's salary sacrifice scheme brings that income down and gets back the tax-free allowance.

Corporation Tax marginal relief

The company makes £248,795 profit, which sits between £50,000 and £250,000. The first £50,000 is effectively taxed at 19% and the rest at 26.5%, giving a total Corporation Tax bill of £62,181.

Dividend tax outside IR35

Your salary and dividends add up to £199,184, so £74,870 of the dividends fall in the higher-rate band and are taxed at 35.75%. Dividend tax comes to £63,044, paid through Self Assessment by 31 January after the tax year ends.

In Scotland

Inside IR35 a Scottish taxpayer takes home £124,489, £8,279 less than in the rest of the UK, because the umbrella salary is taxed at Scottish rates. Outside IR35 the difference is £40, because the tapered allowance puts part of the salary into Scottish tax bands.

What one more day is worth

Billing one more day at £1,200 adds about £548 to your take-home inside IR35, 46% of the day rate, because the top of your umbrella salary is in the additional-rate band. Outside IR35 it adds about £535 (45%), with your top slice of dividends in the same band. So an extra day is worth almost the same either way.

The gap per day billed

The £857 gap works out at £3.90 for each day you bill. That equals about 0.7 days' billing at £1,200: less than two days of work a year. At £1,250 a day it narrows by £55 to £803.

The next tax threshold

Your umbrella salary inside IR35 is already over £125,140, so there is no higher band to reach. Your salary plus dividends outside IR35 is already over £125,140, so there is no higher band to reach.

Guides and definitions

• High Income Child Benefit Charge: how it is worked out and cut (Guide)
• How to read your payslip: every line explained, with an example (Guide)
• National Insurance rates 2026/27: what you pay and how it works (Guide)
• Emergency tax code (An emergency tax code, marked W1, M1 or X, taxes each payday on its own, as if you were paid that amount every period of the year.)
• Marginal tax rate (Your marginal tax rate is the share of your next pound or dollar of income that goes in tax and deductions.)
• P11D (A P11D is the form UK employers send HMRC by 6 July to report each employee's taxable benefits and expenses that were not taxed through payroll.)
• P60 (A P60 is the yearly summary of your pay and tax from one employer, due by 31 May if you work there on 5 April.)
• Personal Allowance (The Personal Allowance is the income you can earn each UK tax year before Income Tax starts: £12,570 for 2026/27.)

Change the days, umbrella fee or company costs

Other day rates

• £950 a day (£107,531 in · £109,108 out)
• £975 a day (£110,054 in · £111,560 out)
• £1,000 a day (£112,578 in · £114,012 out)
• £1,100 a day (£122,673 in · £123,819 out)
• £1,250 a day (£137,816 in · £138,619 out)
• £1,500 a day (£163,054 in · £163,637 out)

Every day rate inside and outside IR35 · Change the days, umbrella fee or company costs

Common questions