Compare limited company (outside IR35), umbrella (inside IR35) and PAYE take-home from your day rate — instantly
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Full breakdown
How the contractor take-home calculation works
Limited company (outside IR35)
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.
Umbrella company (inside IR35)
An umbrella company employs you and invoices the client. It deducts Employer NI (15% on earnings above £5,000) and its weekly margin before paying you as an employee. You then pay income tax and Employee NI (8%/2%) on your employment income. No corporation tax, no dividend strategy — just PAYE.
PAYE employment (benchmark)
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
~£47,500
~£42,800
~£45,300
£450/day × 220 days = £99,000
~£67,000
~£60,500
~£65,100
£600/day × 220 days = £132,000
~£84,500
~£76,200
~£80,800
Estimates assume £1,500 accountant fee, £30/week umbrella fee, no pension. Figures are approximate.
Frequently asked questions
At £500/day for 220 days (£110,000/year), a limited company contractor outside IR35 typically takes home around £73,000–£76,000 (67–69%) after corporation tax, dividend tax and a director salary. An umbrella contractor inside IR35 takes home around £62,000–£65,000 (56–59%). Use the calculator above for a personalised figure.
For contractors outside IR35 earning above £300/day, a limited company typically saves £3,000–£8,000 per year compared to umbrella, after accountant costs. At lower rates or inside IR35, the tax advantage largely disappears. The breakeven depends on your day rate, accountant fees and IR35 status.
IR35 (off-payroll working rules) determines whether HMRC treats your contract work as employment. Inside IR35 means income tax and NI as an employee — the limited company tax advantages largely disappear. Since April 2021, medium and large private-sector clients determine your IR35 status. See our contractor vs employee guide for a full explanation.
For a sole director without Employment Allowance, £12,570 uses your full Personal Allowance (no employee income tax, no employee NI). The company pays Employer NI of 15% on £7,570 (above the £5,000 Secondary Threshold) = £1,136/year. This is a deductible company expense.
If your limited company's VAT-taxable turnover exceeds £90,000 in any rolling 12-month period, you must register for VAT and charge 20% VAT on invoices. Most contractors earning £300+/day exceed this easily. In B2B contexts it is usually neutral — the client reclaims the VAT. Use our VAT calculator to check.
Most contractors use 220 days (260 working days minus 28 holiday days, 8 bank holidays, ~4 days gap between contracts). Conservative estimates use 200–210 days. Long-term single-client contractors may realistically use 230–240 days.