Inside vs outside IR35: what actually changes
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The label decides how tax is collected — and almost everything that follows from it. Here's the honest side-by-side.
Money and tax
| Outside IR35 (PSC) | Inside IR35 | |
|---|---|---|
| Payment | Company invoice, gross | PAYE salary + taxed dividends or umbrella pay |
| Tax | Corporation tax + dividend tax | Income tax + employee NI off the top |
| Net result at £500/day | ≈ £66,000 | ≈ £64,500 (umbrella) |
| Expenses | Company expenses rules | Restricted (travel/hotel rules apply) |
Rights and mechanics
Inside engagements via an umbrella or agency PAYE may carry workplace rights and benefits; a genuine outside-IR35 B2B contract trades those for commercial freedom: substitution, multiple clients, no holiday/sick pay, shorter notice. Neither is "insecure" by definition — but the evidence must match the label. A role tagged outside that requires full-time attendance, named-line-manager direction and indefinite extension is misclassified, and the liability eventually lands somewhere in the chain.
Which pays more?
Outside, on paper — see the 2026/27 worked tables and the calculator for your exact rate. But a genuine outside role also carries admin (accounts, insurance, filings) and no paid downtime.
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