The page models the basic deemed payment calculation used when the off-payroll working rules apply. It starts from the assignment income, applies the 5% flat-rate deduction, removes employer NI and then shows a payroll-style net estimate.
IR35 · CHAPTER 10 ITEPA 2003
IR35 deemed payment calculator
Inside vs outside net pay
£6,657
- 5% flat-rate deduction
- £4,500
- Deemed base before employer NI
- £80,500
- Deemed payment after 5% flat rate and expenses
- £71,678
- Employer NI on deemed payment
- £8,822
- Outside employer NI on salary
- £0
- Inside-IR35 estimated net
- £52,130
- Outside-IR35 estimated net
- £58,787
- Outside company profit before tax
- £72,430
- Corporation Tax
- £15,444
- Dividend Tax
- £10,769
The 5% flat-rate deduction is a simplified off-payroll working allowance. The deemed payment is then reduced by employer NI before PAYE is applied. Status still depends on the contract and working practices, not just the calculator result.
Estimate a deemed payment under the off-payroll working rules and compare it with a simplified outside-IR35 company route. This is a planning tool for contractors, fee payers and advisers.
The page models the basic deemed payment calculation used when the off-payroll working rules apply. It starts from the assignment income, applies the 5% flat-rate deduction, removes employer NI and then shows a payroll-style net estimate.
If a contractor invoices £90,000 a year with £5,000 of business costs, the deemed payment is lower than the headline fee because the 5% allowance and employer NI are deducted before the payroll-style net is calculated. The same income can look very different outside IR35 once salary and dividends are considered.
- Contract status, working practices and the actual engagement facts determine IR35; the calculator is only a financial model.
- Employer NI, salary mix, company expenses and dividend treatment can materially change the outside-IR35 comparison.
- Different regions still affect the PAYE-style income tax and employee NI result inside IR35.
SOURCES & REVIEW
Checked against official guidance
Last reviewed 19 October 2026 · Rule version GB-2026.27.1
Daily/weekly source monitoring. If a source changes, the affected rule set is reviewed before publication.
All source links are kept visible so you can verify the figures used on this page.
Source line: IR35 deemed-payment logic follows GOV.UK off-payroll working guidance and HMRC’s employment-status manual.
GOV.UK: How to calculate the deemed employment payment ↗GOV.UK: Off-payroll working for clients ↗HMRC: ESM10028 deemed direct payment ↗Sources, methodology and update policy →Report an issue or correction →WHY RESULTS DIFFER
Why two users can see different results
Why the result can differ
Different tax codes, payroll periods, Scottish bands, pension methods or lender assumptions can change the outcome.
One-off bonuses, pay frequency, overpayments, allowances and reliefs can move the result away from a simple annual estimate.
Where a rule depends on eligibility or legal status, this page shows an estimate and links to official guidance.
This section is intentionally repeated on key tools so the explanation stays near the result instead of being hidden in a separate policy page.
COMMON QUESTIONS
Frequently asked questions
Does this decide whether I am inside IR35?
No. It models the money side only. The legal status depends on the working arrangement and contract facts.
Is the 5% deduction automatic?
The official deemed-payment steps allow a 5% flat-rate deduction for general business running costs in the calculation.
Does this include VAT?
No. VAT is separate and depends on the supply and registration position.
Why compare inside and outside IR35?
Because the same assignment can produce very different net income depending on whether it is treated as employment or contractor profit extraction.