What is the 5% IR35 deduction?

When inside IR35, the contractor can deduct 5% of the contract value as a flat-rate expense deduction before calculating the deemed payment. This is meant to cover running costs of the PSC.

Who decides IR35 status?

Since April 2021, medium and large private sector clients are responsible for determining IR35 status (off-payroll working rules). Small companies are exempt — the contractor makes their own determination.

What NI rates apply inside IR35?

The deemed payment attracts employee NI at 8% between GBP 12,570 and GBP 50,270 and 2% above, plus employer NI at 15% on earnings above GBP 5,000 (SSCBA 1992 ss.8, 9).

UK IR35 Calculator

Compare inside vs outside IR35 take-home pay

IR35 determines whether a contractor working through a personal service company (PSC) should be treated as an employee for tax purposes. This calculator compares the financial impact of being inside IR35 (deemed employment) vs outside IR35 (genuine business) vs permanent employment.

Frequently Asked Questions

What is the 5% IR35 deduction?+
Who decides IR35 status?+
What NI rates apply inside IR35?+