Trackd · Contractor knowledge
A plain-English guide to what IR35 means, how it changes your take-home pay, and the right questions to ask before you accept a contract.
Educational only — not tax or legal advice. Talk to a specialist contractor accountant for your situation.
IR35 (the "off-payroll working rules") is HMRC's test of whether a contractor is genuinely self-employed or is effectively an employee of the end client. It applies to anyone working through a personal service company (PSC / limited company).
For most rail and rolling stock contracts, the end client decides the status(Network Rail, TOCs/FOCs, ROSCOs, Tier-1s). Your agency processes the determination.
Outside IR35 — you operate as a genuine business through your Ltd company. You invoice gross, pay corporation tax, and draw dividends. Best take-home, more admin.
Inside IR35 — HMRC treats you as a "deemed employee" for tax. The fee-payer (usually the agency) deducts PAYE income tax and employee NI before paying you. Lower take-home, simpler.
TBD — the end client has not yet finalised the assessment.
The same headline day rate can deliver very different take-home pay. Inside IR35 typically takes 25–35% less home than the equivalent Outside IR35 contract once employer NI and apprenticeship levy are deducted by the fee-payer.
Use the calculator below to model both scenarios for your own rate before negotiating.
IR35 Day Rate Calculator
Enter your headline day rate and expected working days. Trackd estimates annual take-home under both scenarios. Approximation based on 2024/25 UK tax rates — speak to your accountant for an exact figure.
Limited company · dividends
Gross
£110,000
Estimated annual take-home
£67,716
62% of gross
PAYE via agency / umbrella
Gross
£110,000
Estimated annual take-home
£64,468
59% of gross
Difference: Outside IR35 keeps approximately £3,248 more per year on these inputs — roughly 5% more take-home.
Estimates assume £12,570 personal allowance, £8,000 expenses, a £12,570 director salary inside the Ltd, and standard 2024/25 thresholds. Excludes pension contributions, student loans, and Scottish bands.
Before you accept
Has the end client issued a Status Determination Statement (SDS)? Ask to see it in writing.
Who is the fee-payer? (Usually the agency for Inside IR35 contracts.)
If Inside IR35, will pay be via agency PAYE or an umbrella company? Get the umbrella's full margin disclosure.
Are employer NI, apprenticeship levy and umbrella margin deducted from your rate, or paid on top?
Is the contract Outside IR35 — and does the working practice actually match the contract terms?
Right of substitution, supervision/direction/control, mutuality of obligation — what does the contract actually say?
If status changes mid-contract, how is the rate adjusted?
Does the end client use the HMRC CEST tool, or run an independent IR35 review?
HMRC's official tool for checking IR35 status. Run it on each contract before signing.
IR35 affects everything from your rate negotiation to your pension. A specialist contractor accountant (look for FCSA-accredited firms) will save you more than they cost.
