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Compare limited company (outside IR35), umbrella (inside IR35) and PAYE take-home from your day rate — instantly
The most tax-efficient structure for outside-IR35 contractors. The company invoices the client at your day rate. After company costs (director salary, Employer NI, accountant fees, pension), the remaining profit is taxed at Corporation Tax rates. Post-tax profit can be extracted as dividends, which are taxed at lower rates than salary and carry no National Insurance.
Director salary: £12,570 — uses the full Personal Allowance. At this salary level, the company pays Employer NI of 15% on £7,570 (the amount above the £5,000 Secondary Threshold) = £1,136/year. This is fully deductible from company profits.
An umbrella company employs you and invoices the client. Out of that assignment income it pays its weekly margin and Employer NI (15% of your gross pay above £5,000), and pays you the rest as gross salary. This calculator does not include the Apprenticeship Levy (0.5% of pay) or employer pension contributions, which many umbrellas also take from the assignment income, so your payslip may be slightly lower. You then pay income tax and Employee NI (8%/2%) on your employment income. No corporation tax, no dividend strategy — just PAYE.
Shown as a reference point. The same annual gross is taxed entirely as employment income — income tax at 20%/40%/45% and Employee NI at 8%/2%. No Employer NI deduction from your income (the employer pays this separately). This is the equivalent employed take-home.
| Contract value | Ltd Co outside IR35 | Umbrella inside IR35 | PAYE equivalent |
|---|---|---|---|
| £300/day × 220 days = £66,000 | ~£48,400 | ~£43,400 | ~£48,800 |
| £450/day × 220 days = £99,000 | ~£64,000 | ~£60,100 | ~£68,000 |
| £600/day × 220 days = £132,000 | ~£79,100 | ~£73,900 | ~£81,700 |
Estimates assume £1,500 accountant fee, £30/week umbrella fee, no pension. Figures are approximate.
The statutory rates behind this take-home estimate, with sources. Last checked on 2 September 2026.
Assumptions. This models the common limited-company structure of a low salary plus dividends drawn from post-corporation-tax profit. It assumes you are outside IR35, have no other income, and take the full available profit as dividends in the same tax year. It does not model VAT, the flat rate scheme, employment allowance, pension contributions or expenses beyond those you enter. Dividend tax rates are UK-wide; corporation tax is not devolved.
Correction, 26 October 2026. Before this date the limited-company result did not count dividends covered by the £500 dividend allowance towards the basic and higher rate limits, used a fixed higher rate band that ignored the Personal Allowance taper, and did not tax the part of the £12,570 director salary that the tapered allowance no longer covers. That understated personal tax by up to £125 a year once dividends exceeded £37,700 (for example £450 a day for 220 days: take-home £64,154 instead of £64,029) and by between about £600 and £5,800 a year once total income exceeds £100,000 (for example £750 a day for 220 days, with the default £1,500 accountant fee: take-home £95,294 instead of £89,494). Dividends inside the allowance are tax-free but still use band space, and the additional rate applies above £125,140 of taxable income. The answer to “How much does a contractor take home from a £500/day rate?” also overstated the limited-company figure (£73,000–£76,000); at 2026/27 rates it is about £69,000–£70,000. The umbrella result also charged employer NI on the whole assignment income instead of on your gross pay, which understated umbrella take-home by about £800 to £2,300 a year for day rates from £250 to £1,000 (for example £500 a day for 220 days with a £30 weekly fee: £64,318 instead of £65,627); the worked-example table (whose figures had drifted from the calculator) and the umbrella figures in the FAQ have been corrected to match. No rate changed.