£200 a day inside and outside IR35

Where £44,000 goes inside IR35

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

Where £44,000 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.

£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 £37,793 to match the inside IR35 take-home, and about £41,557 to match outside IR35. That ignores holiday pay, sick pay and employer pension, which a permanent job adds on top.

All in the basic-rate band

The umbrella salary of £37,792 stays under the £50,270 higher-rate threshold, so everything above your Personal Allowance is taxed at 20% plus 8% National Insurance.

Small profits rate

The company's profit of £28,795 is under £50,000, so it all pays the 19% small profits rate of Corporation Tax: £5,471.

Dividend tax outside IR35

All the dividends fall in the basic-rate band, so after the £500 dividend allowance they are taxed at 10.75%. Dividend tax comes to £2,454, paid through Self Assessment by 31 January after the tax year ends.

In Scotland

Inside IR35 a Scottish taxpayer takes home £30,687, £43 less than in the rest of the UK, because the umbrella salary is taxed at Scottish rates. Outside IR35 the difference is nil, because dividends are taxed at the same rates across the UK and a £12,570 salary is tax-free.

What one more day is worth

Billing one more day at £200 adds about £122 to your take-home inside IR35, 61% of the day rate, because the top of your umbrella salary is in the basic-rate band. Outside IR35 it adds about £145 (72%), with your top slice of dividends in the same band. So each extra day widens the gap in favour of working outside IR35.

The gap per day billed

The £2,710 gap works out at £12.32 for each day you bill. That equals about 13.6 days' billing at £200: more than two working weeks of work a year. At £225 a day it widens by £548 to £3,258.

The next tax threshold

At about £266 a day, your umbrella salary inside IR35 reaches the £50,270 higher-rate threshold, which is £66 a day above this rate. At about £281 a day, your salary plus dividends outside IR35 reaches the £50,270 higher-rate threshold, which is £81 a day above this rate.

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

• £225 a day (£34,159 in · £37,416 out)
• £250 a day (£37,587 in · £41,392 out)
• £275 a day (£40,763 in · £45,368 out)
• £300 a day (£43,525 in · £48,445 out)
• £325 a day (£46,286 in · £51,043 out)
• £350 a day (£49,048 in · £53,640 out)

Every day rate inside and outside IR35 · £38,000 salary after tax · Change the days, umbrella fee or company costs

Common questions