IR35 Status Checker
Assess your employment status (Inside vs Outside IR35) for tax purposes. Check both contract terms and working practices.
Choose Assessment Type
Select what you'd like to assess for IR35 status
Important Disclaimer
This tool provides indicative calculations only and does not constitute financial, accounting, tax, or legal advice. The accuracy of results depends on the accuracy of information you provide. Consult a qualified professional for complex situations.
Overview
IR35 is a critical tax legislation in the UK designed to combat disguised employment, where workers provide services to clients through an intermediary, typically their own limited company, but would be considered employees if engaged directly. HMRC uses IR35 to determine whether a contractor falls inside or outside the rules, which impacts tax liability. The assessment focuses on key factors such as control, substitution, mutuality of obligation, and financial risk. Misclassification can lead to significant penalties, including backdated taxes, National Insurance contributions, and interest charges. Understanding IR35 is essential for contractors, freelancers, and businesses engaging them to ensure compliance and avoid costly mistakes. The 2026/27 tax year introduces updated rates and thresholds, making it crucial to apply the correct figures when assessing IR35 status. This tool simplifies the process by providing a clear, structured approach to evaluating IR35 compliance based on HMRC’s criteria.
Worked Example (2026/27)
### Scenario: A UK contractor providing IT consultancy services in 2026/27
**Inputs:** - Contractor’s gross income: £80,000 - Dividend allowance: £500 - Dividend tax rate: 10.75% (basic rate), 35.75% (higher rate), 39.35% (additional rate) - Employment Allowance: £10,500 - Employer NI threshold: £5,000 - Employer NI rate: 15% - Employee NI rate: 12% (primary threshold)
**Calculation:** 1. **Dividend calculation:** - Dividend income: £80,000 - £500 (allowance) = £79,500 - Basic rate tax (10.75%): £79,500 * 10.75% = £6,956.25 - Higher rate tax (35.75%): £79,500 * 35.75% = £26,831.25 - Total dividend tax: £6,956.25 + £26,831.25 = £33,787.50
- **Employer NI calculation:**
- - Employer NI threshold: £10,500 (Employment Allowance)
- - Employer NI rate: 15%
- - Employer NI: (£80,000 - £10,500) * 15% = £10,425
- **Employee NI calculation:**
- - Employee NI threshold: £12,570 (primary threshold)
- - Employee NI rate: 12%
- - Employee NI: (£80,000 - £12,570) * 12% = £8,100.60
**Final figures:** - Dividend tax: £33,787.50 - Employer NI: £10,425 - Employee NI: £8,100.60
**Total tax liability:** £33,787.50 (dividend tax) + £8,100.60 (employee NI) = £41,888.10
2026/27 Rates & Thresholds
| Tax Type | 2026/27 Rate/Threshold |
|---|---|
| **Dividend Tax Rates** | |
| Basic Rate (10.75%) | Applies to dividend income within the basic rate band (up to £37,700 taxable income) |
| Higher Rate (35.75%) | Applies to dividend income within the higher rate band (£37,701 to £125,140 taxable income) |
| Additional Rate (39.35%) | Applies to dividend income above £125,140 taxable income |
| **Dividend Allowance** | £500 |
| **Employment Allowance** | £10,500 (reduces employer National Insurance contributions) |
| **Employer National Insurance (NI) Rates** | |
| 15% | Applies to earnings above £5,000 per year (after Employment Allowance) |
| **Employee National Insurance (NI) Rates** | |
| 12% | Primary threshold (£12,570 annual earnings) |
| **VAT Threshold** | £90,000 (registration required if taxable turnover exceeds this) |
| **National Living Wage (NLW)** | £12.21 per hour (for workers aged 21 and over) |
| **Stamp Duty Land Tax (SDLT) Thresholds** | |
| Nil-rate threshold | £125,000 (no SDLT paid on properties below this) |
| First-time buyer (FTB) threshold | £300,000 (no SDLT paid on properties below this for FTB) |
Common Mistakes HMRC Penalises
- Assuming IR35 status based solely on contract wording without considering actual working practices.
- Ignoring HMRC’s recent updates to dividend tax rates, which could lead to incorrect calculations.
- Failing to apply the Employment Allowance correctly, resulting in overpayment of employer National Insurance.
- Overlooking the £90k VAT threshold, which could trigger penalties for late registration.
- Misclassifying workers as self-employed when they meet employee-like conditions under IR35.
When to Seek Professional Advice
If your contract involves significant control over how, when, and where work is performed, it may resemble employment and warrant IR35 scrutiny. Similarly, if mutuality of obligation exists—where the client is obligated to provide work and you are obligated to accept it—this is a strong indicator of an inside IR35 status. Financial risks such as no opportunity for profit or loss, or lack of responsibility for business expenses, also suggest an employee relationship. If you’re unsure about any of these factors or their implications, consult a tax professional to avoid penalties and ensure compliance with HMRC’s rules.
Frequently Asked Questions
How do the 2026/27 dividend tax rates affect my take-home pay as a limited company director?+
For the 2026/27 tax year, dividends are taxed at 10.75% in the basic rate band, 35.75% in the higher rate band, and 39.35% in the additional rate band. You benefit from a reduced dividend allowance of £500, meaning any dividends above this threshold are fully taxable at the relevant marginal rate. These rates apply after your personal allowance is used up against salary or other income.
What are the new employer National Insurance contributions for directors in 2026/27?+
From April 2026, employers must pay 15% National Insurance on earnings above the £5,000 annual threshold, replacing the previous primary threshold. This applies to all employees, including company directors, and is calculated on the total salary paid above the lower earnings limit. There is no secondary threshold, so the 15% rate applies immediately once the £5,000 mark is exceeded.
When does Making Tax Digital for Income Tax (MTD ITSA) become mandatory for my business?+
Making Tax Digital for Income Tax Self Assessment becomes mandatory for all unincorporated businesses with annual income over £50,000 starting from 6 April 2026. You will need to keep digital records and submit four quarterly updates to HMRC throughout the tax year. This requirement aims to improve compliance and reduce errors in self-assessment reporting.
What is the Section 455 tax rate on director's loans in 2026/27?+
If you withdraw more money from your company than you have paid in as salary or dividends, you must pay Section 455 tax at a rate of 35.75% on the outstanding loan amount. This tax is due nine months and one day after the end of the company's accounting period. Once the loan is repaid, the company can claim a refund of this tax from HMRC.
At what turnover level must I register for VAT under the new rules in 2026/27?+
You must register for VAT if your taxable turnover exceeds the £90,000 threshold over any rolling 12-month period. This threshold applies to all businesses, including contractors and SMEs, and requires you to submit VAT returns and make payments to HMRC. You can also choose to register voluntarily if your turnover is below this limit to reclaim input tax.
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