An AI contractor inside IR35 at £700/day (220 working days = £154,000 gross contract value) takes home approximately £90,000–£95,000/year after income tax, National Insurance and umbrella company fees. Inside IR35 means being treated as a “disguised employee” — your full contract rate is taxed as income. Compared to outside IR35, you lose approximately £15,000–£20,000/year in take-home pay.
Based on 220 working days/year via umbrella company. 2026-27 tax rates.
| Item | Amount |
|---|---|
| Gross contract value | £154,000 |
| Employer NI + umbrella fee (combined) | −£22,000 |
| Net employment income | £132,000 |
| Income tax (higher + additional rates, no personal allowance) | −£47,000approx |
| Employee's NI | −£5,000approx |
| Take-home | ~£80,000–£85,000before pension |
Pension tip: With 5% pension salary sacrifice contributions via your umbrella, take-home improves to approximately £90,000–£95,000. Pension contributions reduce your adjusted net income (ANI) and may recover some or all of the personal allowance (worth up to £5,028 in additional tax relief if ANI is between £100,000–£125,140).
220 days/year. Inside IR35 figures include pension salary sacrifice. Outside IR35 via limited company with optimised salary/dividend split.
| Day Rate | Annual Value | Take-Home (Inside IR35) | Take-Home (Outside IR35) | Difference |
|---|---|---|---|---|
| £500/day | £110,000 | ~£65,000 | ~£78,000 | ~£13,000 |
| £600/day | £132,000 | ~£77,000 | ~£92,000 | ~£15,000 |
| £700/daymedian | £154,000 | ~£90,000* | ~£108,000 | ~£18,000 |
| £800/day | £176,000 | ~£100,000 | ~£124,000 | ~£24,000 |
| £1,000/day | £220,000 | ~£120,000 | ~£150,000 | ~£30,000 |
* £700/day inside IR35 figure assumes 5% salary sacrifice pension contributions. Without pension, take-home is approximately £80,000–£85,000. All figures are estimates. Consult our IR35 calculator for your precise figures.
Salary sacrifice pension contributions reduce your adjusted net income (ANI). If your ANI falls between £100,000–£125,140, you recover some or all of the personal allowance (worth up to £12,570 × 40% = £5,028 in tax). This is the most effective tax mitigation strategy available inside IR35.
Inside IR35 via an umbrella company, you can still claim genuine business expenses: professional subscriptions (CIPD, BCS, etc.), equipment, training and CPD courses. However, travel and subsistence costs to a regular workplace are not claimable under the supervised, directed or controlled (SDC) rules.
Umbrella company fees vary from £15–£50/week (£780–£2,600/year). Over a typical 12-month contract, choosing a lower-fee compliant umbrella saves a meaningful amount. Some umbrellas also offer benefits such as statutory sick pay, holiday pay and employer liability insurance — factor these into your comparison.
Use our calculators to get precise figures based on your day rate, days worked and pension contributions.