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Tax year 2026/27 · Rest of UK · annual

UK Contractor Calculator

Compare umbrella (PAYE) vs limited company take home for 2026/27.

Tax year
Region
Schedule

Your details

Umbrella take-home (year)

£72,733

£6,061/month after PAYE

Limited take-home (year)

£69,016

£5,751/month via dividends

Limited company advantage

−£3,717

per year vs umbrella (umbrella wins)

Umbrella (PAYE) breakdown

Contract value£110,000
Umbrella margin−£1,300
Taxable pay£108,700
Income tax−£31,782
Employee NI−£4,185
Take-home pay£72,733

Limited company breakdown

Contract value£110,000
Director salary−£12,570
Employer NIC (15%)−£1,136
Company expenses−£2,000
Taxable profit£94,295
Corporation tax (25%)−£23,574
Dividends paid£70,721
Dividend tax−£14,275
Take-home pay£69,016

Interactive scenarios

Tax and deductions, your way

Tax year

Region

Pay schedule

Salary £45,000

Net (monthly)

£2,806

Income tax (monthly)

£541

NI (monthly)

£216

Effective rate

20.2%

Modelled on a 5% pension. Showing monthly figures, rest of UK, tax year 2026/27.

The full guide

Everything worth knowing about Contractor

Worked examples with real figures, the rules underneath the number, and the traps that catch people out.

01

Contractor Calculator UK: £500 a day pays more through an umbrella, on these rules

The contractor calculator runs one contract two ways, through an umbrella company on PAYE and through your own limited company, and compares the take home pay of each. At the starting figures, £500 a day for 220 days, the umbrella route pays £72,733 a year and the limited route pays £69,016, so the umbrella wins by £3,717 under the simplified rules this calculator applies.

Whether the choice exists at all depends on IR35. Inside IR35 the limited route closes and PAYE applies; outside it, both columns stand. The sections below run the IR35 gate, the umbrella maths, the limited company maths and the worked example in the order the calculator applies them.

Read the corporation tax line before the result

This calculator charges corporation tax at a flat 19% on profits up to £50,000 and a flat 25% above that figure, with no taper between the two. Real corporation tax relieves that jump gradually, so the limited column here is a cautious floor at high profits rather than a final verdict.

02

IR35 first: the status decides whether a choice exists

IR35 is the gate in front of both columns. A contract inside IR35 is treated as deemed employment, so the limited company route is not available and the pay runs through PAYE, exactly as the umbrella column models it. The calculator greys the limited result out the moment you switch the status to inside, because there is no second answer to show.

A contract outside IR35 leaves both routes open, and only then does the comparison on this page mean anything. The toggle near the top of the calculator is therefore the first input to set, before the day rate, because it decides whether you are choosing between two numbers or simply reading one.

The calculator takes the status as given. It does not test your working arrangements, your contract wording or your client's determination, and no figure on this page can tell you which side of the line a real contract sits on. Set the toggle to the status you already hold and use the page for the money question that follows it.

Status also follows the contract rather than the contractor. The same person can hold an outside contract and an inside one in the same year, and each engagement is modelled on its own toggle setting here, so a mixed year takes two runs of this calculator rather than one.

03

The umbrella route: margin off the top, then PAYE

The umbrella calculation runs in three steps. It multiplies the weekly margin by 52 and takes it off the contract value, then runs what remains through the standard PAYE machinery of personal allowance, income tax bands and employee National Insurance, and reports what survives. At a £25 weekly margin the fee costs £1,300 a year before tax is even mentioned.

The personal allowance taper does quiet damage at high day rates. The £110,000 contract in the worked example leaves £108,700 of taxable pay after the margin, and income above £100,000 hands back a pound of allowance for every two pounds earned, which cuts this allowance to £8,220. The lost allowance pulls £4,350 of pay into tax that a lower paid contractor would keep sheltered, and the effect is already inside the umbrella figure the calculator shows.

The deductions themselves are the familiar ones. Income tax on the example comes to £31,782 and employee National Insurance to £4,184.60, charged at 8% up to the £50,270 upper limit and 2% above it. Take home pay lands at £72,733.40, and the calculator also shows it as £6,061.12 a month for comparison against a salary.

Notice what the route never charges. No corporation tax appears, no dividend tax appears, and no company costs appear beyond the margin itself, because the umbrella is the employer and the contract value reaches you as employment income. That simplicity is the route's real product, and at some profit levels, as the worked example shows, it wins on money as well.

The margin is also the only umbrella specific cost the model charges, and it leaves the contract value before tax, which softens it: the fee removes the income tax and National Insurance that the same slice of pay would have carried, so its true cost lands below the £1,300 headline.

04

The limited route: salary, corporation tax, then dividends

The limited company route pays you in two currencies: a small salary and the rest as dividends. The calculator fixes the salary at £12,570, exactly the personal allowance, so the salary itself carries no income tax and uses the whole allowance in one move. Employer National Insurance applies above £5,000 of salary at 15%, which costs £1,135.50 on that salary, and your company expenses come off beside it.

What remains is taxable profit, and corporation tax takes its slice at the calculator's simplified rates: 19% on profits up to £50,000 and 25% on profits above that figure, applied flat to the whole profit rather than tapered between the two. The worked example's profit of £94,294.50 therefore pays £23,573.62, and that single line is where the limited route loses its fight at high day rates.

Dividends carry what survives to you personally. Profit after corporation tax becomes the dividend, £70,720.88 in the example, and dividend tax then applies in layers: the first £500 is covered by the dividend allowance, the next slice fills the basic rate band your salary left empty, £37,700 of room charged at 8.75%, and the remainder pays 33.75% in the higher band, with 39.35% waiting above it.

On the example figures the layers price out at £3,298.75 for the basic slice and £10,975.80 for the higher slice, a dividend tax bill of £14,274.55. Add the £12,570 salary to the dividends after their tax and take home pay is £69,016.33. Every layer is visible in the breakdown above, so you can point at the exact line where a different day rate would change the answer.

05

Worked example: £500 a day for 220 days, outside IR35

Take the starting figures on the page, in the order the calculator builds them: a £500 day rate, 220 billable days, an umbrella margin of £25 a week and £2,000 of company expenses. The contract value is £110,000 before either route touches it.

The umbrella runs first. The margin takes £1,300 across the year, leaving taxable pay of £108,700. Income above £100,000 loses personal allowance at a pound for every two pounds earned, so the allowance falls to £8,220, income tax comes to £31,782 and employee National Insurance comes to £4,184.60. Take home pay is £72,733.40, or £6,061.12 a month.

The limited route runs next. A director salary of £12,570 uses the full personal allowance, employer National Insurance on it is £1,135.50, and expenses take £2,000, leaving taxable profit of £94,294.50. Corporation tax at the flat 25% rate is £23,573.62, dividends of £70,720.88 follow, and dividend tax on them is £14,274.55. Adding the salary back gives take home pay of £69,016.33, or £5,751.36 a month.

The umbrella therefore wins this example by £3,717.07 a year. Now drop the contract to £300 a day for 200 days and run both routes again. The contract value is £60,000, company profit falls to £44,294.50, under the £50,000 corporation tax line, so the limited route pays £8,415.95 at 19% and dividends of £35,878.54 carry just £3,095.62 of dividend tax, all of it in the basic slice. Limited take home pay is £45,352.92 against the umbrella's £44,603.40, and the limited route wins by £749.52. The profit line, not the day rate, picks the winner inside this calculator.

06

What this calculator leaves out

Corporation tax is the big simplification, and the calculator states it in its own assumptions. Real corporation tax charges 19% at low profits and 25% at high ones but relieves the jump with marginal relief across the profit range between the two, so a real company at the worked example's profit pays less than the flat 25% used here. The limited column is therefore understated at high profits, by an amount that grows with the profit itself.

The salary never moves. The model fixes it at £12,570 for every contract, while a real director and their accountant tune the salary and dividend mix each year against the thresholds, and route company pension contributions through the company as a cost before corporation tax. None of that optimisation appears here, and pension contributions in particular can move the limited answer by thousands on a large contract.

The umbrella side simplifies too. The model takes the contract value, removes only the margin, and applies income tax and employee National Insurance, exactly the lines its breakdown shows. Real umbrella quotes are built on their own fee and cost structures, so a payslip from a specific umbrella can differ from this column even at the same day rate and margin.

Expenses are the input you control most directly. The calculator takes the figure you type, £2,000 at the starting settings, covering the accountancy, insurance and software a limited company typically carries. Understate them and the limited column flatters itself; overstate them and it does the opposite, so price the route with the costs you would genuinely pay.

The calculator's own closing advice stands as the last word on this page: the comparison prices two routes on simplified rules, and a contractor choosing between them for a real contract should take professional advice on the status, the salary mix and the costs before signing anything.

07

Where the UK Contractor Calculator gets its figures

Rates, bands and thresholds follow published HMRC and gov.uk figures for the 2026/27 tax year, held in one table that every tool reads. April arrives, the table changes, and the results move together.

Earlier years stay available through the year selector, so a late self assessment runs on the numbers that applied at the time rather than today's.

Some cases still need an accountant. K codes carrying negative allowances, bespoke sacrifice arrangements, the annual allowance taper for very high earners, and anything involving two employments at once.

Example gallery

Real inputs, real outputs

Graduate starter

First job, default workplace pension.

rUK

Gross / yr

£28,000

Pension

5%

Income tax

£3,086

NI

£1,234

Take home / month£1,857

Mid career

Standard tax code, modest pension uplift.

rUK

Gross / yr

£45,000

Pension

6%

Income tax

£6,486

NI

£2,594

Take home / month£2,768

Higher rate

Crossing the higher rate band.

rUK

Gross / yr

£72,000

Pension

8%

Income tax

£16,232

NI

£3,451

Take home / month£3,880

Scotland mid

Scottish bands applied.

Scotland

Gross / yr

£45,000

Pension

5%

Income tax

£6,882

NI

£2,594

Take home / month£2,773

About this calculator

The Contractor Calculator compares your take-home pay as a UK contractor working through an umbrella company (PAYE) versus your own limited company, for the 2026/27 tax year. Enter your day rate and billable days to see both routes side by side.

Quick reference

Allowance 0%
0%
Basic 20%
20%
Higher 40%
40%
Additional 45%
45%

Frequently asked questions

Is it better to work through a limited company or an umbrella company?+
It depends on your IR35 status and day rate. Outside IR35, a limited company usually leaves you with more take-home pay because dividends are taxed at lower rates than PAYE earnings, though you take on admin, accountancy costs and the risk of an HMRC status challenge. Inside IR35 you are treated as a deemed employee, so the umbrella route is the compliant choice and the comparison is effectively made for you.
What does inside IR35 mean for my take-home pay?+
Inside IR35 means HMRC treats you like an employee for tax purposes, so income tax and National Insurance are deducted at source either through an umbrella company or your agency's payroll. You cannot take the dividend route, which removes the main tax advantage of a limited company. The calculator shows the umbrella figure as your realistic take-home when you select inside IR35.
How much should I set aside for tax as a limited company contractor?+
A common rule is to keep 25 to 30 percent of each invoice in a separate pot. That covers 19 to 25 percent corporation tax on profits plus dividend tax of 8.75 to 39.35 percent depending on your total income, with only a £500 dividend allowance tax-free. Higher-rate contractors often need nearer a third once personal tax is included, so run your exact day rate through the calculator rather than guessing.
What is the umbrella company margin and who pays it?+
The margin is the umbrella company's weekly or monthly fee for running your payroll, usually £15 to £30 a week. It comes out of the contract income before tax, so you bear the cost but get tax relief on it. Always compare the margin alongside employment costs like employer's National Insurance, which umbrellas deduct from the assignment rate, because a low headline margin can hide higher overall deductions.
Can I use the £12,570 personal allowance through my limited company?+
Yes, most contractors pay themselves a director's salary of £12,570 to use the personal allowance in full, which means no income tax or employee National Insurance on the salary itself. The company still pays 15 percent employer National Insurance on the slice above £5,000, which costs about £1,136 a year. The rest of your income is taken as dividends, which is where the tax saving comes from.
Do I pay National Insurance on dividends?+
No, dividends are free of National Insurance, which is one of the main reasons the limited company route can beat umbrella PAYE. You pay dividend tax instead: 8.75 percent in the basic-rate band, 33.75 percent at higher rate and 39.35 percent at additional rate, after a £500 annual dividend allowance. Dividends stack on top of your salary, so a bigger salary pushes more dividends into higher dividend tax bands.
What expenses can a limited company contractor claim?+
You can claim costs that are wholly and exclusively for the business: accountancy fees, business insurance, software, a home office allowance, travel to temporary workplaces and pension contributions made by the company. Each £1 of allowable expense saves up to 25p of corporation tax. Keep receipts and get an accountant before your first year end, because the rules on travel and subsistence are strict and HMRC checks them.