£1600/Day Rate: Inside vs Outside IR35

At a £1600/day rate (£352,000 annually over 220 working days), your take-home is £175,886 outside IR35 (limited company), £173,759 inside IR35 (umbrella), and £198,346 as a permanent employee.

A contractor charging £1600/day earns £352,000 annually (based on 220 working days). Working outside IR35 through a limited company, your take-home is £175,886 — that is £-22,461 more than a permanent employee on the same gross salary. Inside IR35 via an umbrella company, you take home £173,759, which is £2,126 less than outside IR35.

Full tax breakdown at £1600/day

Employee (PAYE)	Outside IR35 (Ltd)	Inside IR35 (Umbrella)
Gross revenue	£352,000	£352,000	£352,000
Umbrella margin	—	—	£1,300
Employer NI	Employer pays	£1,136	£45,091
Accountancy fees	—	£1,500	—
Corporation tax	—	£84,199	—
Income tax	£144,603	—	£123,727
Employee NI	£9,051	—	£8,123
Dividend tax	—	£86,766	—
Take-home	£198,346	£175,886	£173,759
Effective tax rate	43.6%	50.0%	50.6%

Outside IR35 assumes a limited company paying £12,570 director salary plus dividends, with £1,500 accountancy fees. Inside IR35 assumes an umbrella company deducting £25/week margin.

Why outside IR35 pays £-22,461 more

Working outside IR35 through a limited company is more tax-efficient because:

• Low salary, high dividends — A £12,570 salary uses the full personal allowance with zero income tax and zero NI. The rest is extracted as dividends.
• Lower dividend tax rates — Dividends are taxed at 8.75% (basic), 33.75% (higher), and 39.35% (additional), compared to 20%/40%/45% for employment income.
• Corporation tax first — Profits are taxed at 19-25% before dividends, but the combined effective rate is still lower than PAYE.

At £1600/day, the outside IR35 effective tax rate is 50.0%, compared to 43.6% for an employee. That difference of -6.4% translates to £-22,461 more in your pocket per year.

What you lose outside IR35

The extra take-home comes with trade-offs:

• No employer pension contributions — You must fund your own pension. Consider contributing from your limited company for corporation tax relief.
• No paid holiday — At £1600/day, each holiday day costs you £1,600 in lost revenue. 25 days off = £40,000 less revenue per year.
• No sick pay, no redundancy, no employment rights — You are a business, not an employee.
• Admin and compliance costs — Accountancy fees (£1,500+), professional indemnity insurance, IR35 reviews, and Companies House filings.
• IR35 risk — If HMRC later determines you were inside IR35, you may owe back-taxes plus penalties.

Compare other day rates

• £1500/day: Outside £165,878, Inside £163,620, Employee £186,686
• £1550/day: Outside £170,882, Inside £168,689, Employee £192,516
• £1575/day: Outside £173,384, Inside £171,224, Employee £195,431
• £1625/day: Outside £178,387, Inside £176,294, Employee £201,261
• £1650/day: Outside £180,889, Inside £178,829, Employee £204,176
• £1700/day: Outside £185,893, Inside £183,898, Employee £210,006

Related calculators

• Self-employed tax calculator — if you work as a sole trader instead
• Dividend tax calculator — detailed dividend tax calculation
• Employer cost calculator — true cost of hiring you as an employee

Frequently asked questions

How much do I take home at £1600/day outside IR35?

Outside IR35 through a limited company, your annual take-home is £175,886 (£14,657/month) on revenue of £352,000.

What is the difference between inside and outside IR35 at £1600/day?

Outside IR35 you take home £175,886, inside IR35 you take home £173,759 — a difference of £2,126 per year (£177/month).

Who decides if I'm inside or outside IR35?

Since April 2021, the client (or the agency) makes the IR35 determination for medium and large private sector businesses. Small companies are exempt — the contractor still determines their own status. HMRC provides the CEST tool to help, though it is not legally binding.