- Outside IR35, you bill through your own company and choose how to extract the money.
- The usual mix is a £12,570 salary plus dividends from profit after corporation tax.
- Corporation tax (19% to 26.5%) is paid on company profit before dividends.
- Take-home is typically higher than the same rate inside IR35, because there is no employer NI on dividends.
- Legitimate business expenses reduce the profit, and therefore the tax.
Calculator
How outside IR35 works
When your contract is genuinely outside IR35, you operate through your own limited company. The company invoices the client, pays corporation tax on its profit, and you decide how to take the money out. There is no umbrella and no deemed employment.
This is where the efficiency comes from: dividends carry no National Insurance, and you control the timing and mix of salary and dividends, within the tax rules.
Salary and dividends
The calculator assumes the common owner-managed setup:
- A salary of £12,570, which uses the personal allowance and is deductible for the company
- The remaining profit taxed at corporation tax, then extracted as dividends
- Dividend tax at 8.75%, 33.75% or 39.35% on those dividends
It assumes no Employment Allowance, which most single-director companies cannot claim. Your optimal split may differ, which our optimal director salary guide works through in detail.
Outside versus inside IR35
The same day rate usually leaves you better off outside IR35 than inside, because you avoid employer National Insurance on the dividend portion and can offset genuine business costs. Compare the two with the inside IR35 calculator.
The decision is not yours to make freely, though: status depends on the reality of the working relationship, and getting it wrong carries real risk. Treat the comparison as information, not a reason to assume a status that does not fit.