IR35 Deemed Payment Calculator (2026/27)
Work out your Chapter 8 IR35 deemed payment for 2026/27, step by step, including the 5% expenses allowance, pension contributions and employer NI.
5.0% notional expenses allowance applied before tax
Chapter 8 (ITEPA 2003 Part 2) 5% notional expenses allowance — deductible from gross fee income before computing the deemed employment payment. Only available where Chapter 8 applies (the worker's own intermediary, in the few cases where Chapter 8 rather than Chapter 10 governs, e.g. genuinely small end-client companies). It is NOT available under Chapter 10 (public sector since 2017, medium/large private-sector clients since April 2021) — there the fee-payer operates PAYE/NI directly on the invoice value and no 5% allowance applies at all. HMRC's worked methodology is at ESM3145.
Working out your Chapter 8 IR35 deemed payment step by step
Where Chapter 8 of the off-payroll working rules applies — broadly, where your own intermediary company is responsible for assessing status, which in practice now means end clients that qualify as small companies — your company has to work out a 'deemed payment' at the end of the tax year and account for PAYE and National Insurance on it, following HMRC's own worked methodology. Chapter 10, which has applied in the public sector since 2017 and to medium and large private-sector clients since April 2021, works completely differently: the fee-payer operates PAYE and National Insurance directly on the invoice value, and none of the deemed payment mechanics — including the 5% allowance below — apply at all.
This calculator reproduces HMRC's Chapter 8 deemed payment worksheet for 2026/27 rather than giving you a single opaque total: gross fee income, the 5% notional expenses allowance, actual deductible expenses and pension contributions, employer National Insurance on what's left, and finally the deemed payment itself, which is then subject to PAYE income tax and employee National Insurance as if it were salary.
How the deemed payment is calculated
- Start with gross fee income received by your intermediary company for the engagement
- Deduct the 5% notional expenses allowance — this step only applies under Chapter 8; skip it entirely if your engagement falls under Chapter 10
- Deduct any pension contributions your company makes directly and other actual allowable expenses
- Deduct employer National Insurance (15% above the £5,000 secondary threshold) calculated on the remaining balance
- What's left is the deemed payment, which is then subject to PAYE income tax and employee Class 1 National Insurance in the normal way
