IR35 is the set of rules that decides whether a contractor working through their own company is really a disguised employee. If a contract is inside IR35, the client or agency deducts PAYE tax and NI as if you were employed, so the limited company route no longer applies and the umbrella figures are the realistic ones.

How many days a year does a contractor work?

Usually somewhere between 200 and 225. There are 260 weekdays a year; take off around 33 days of holiday and bank holidays, a few sick or training days and any gaps between contracts. This calculator starts at 212.

What is the rule of thumb for converting a day rate to a salary?

Outside IR35 through a limited company, a day rate of about 0.5% of a salary gives similar take-home once holidays and gaps are counted, so £350 a day is roughly a £70,000 job. Inside IR35 you need around 10% more.

Is £12,570 the best director's salary?

For a one-person company it usually is. The salary uses your personal allowance, costs no income tax or employee NI, and together with its employer NI it saves corporation tax that is worth more than the NI costs. You can change it under Business costs.

Does VAT change my take-home?

Not directly. A VAT-registered company charges VAT on top of the day rate and passes it to HMRC, so enter the rate before VAT. The Flat Rate Scheme can leave a small gain, which this calculator does not include.

Why does the comparison include pension?

An employer pension contribution is part of your pay even though it never reaches your bank account. To compare fairly, the calculator assumes you pay the same amount into a pension while contracting; change it or switch the comparison to take-home only.

Contractor Calculator

What a day rate is worth through a limited company, an umbrella or as a sole trader, side by side with a permanent salary, holidays and pension included.

Your contract

Day rate, before VAT

Holidays

days

Bank holidays

days

Sick and training

days

Between contracts

days

260 weekdays − 48 days off = 212 paid days · £106,000 a year

Permanent salary to compare

I live in Scotland

Scottish bands on salary and umbrella pay; dividends use UK rates

Your pension

Employer pension

Yearly bonus

Benefits worth

Benefits are what perks like private medical, life cover or a gym are worth to you a year. They count in the comparison when it includes pension. Paid holiday and sick pay are already covered by the days off above.

Pension by salary sacrifice

Saves NI on your contribution as well as tax

Paid in each year

The gross amount reaching your pot. A limited company pays it before corporation tax, an umbrella by salary sacrifice, and a sole trader personally with tax relief.

Expenses

Kit, insurance, training

Director's salary

£12,570 is usual

Company running costs

Accountant, bank, admin

Sole trader accountant

Or £0 if you file yourself

Umbrella margin per week

Apprenticeship levy passed on

Most umbrellas take 0.5% of pay from your rate

Best contracting route: sole trader

£74,663

a year with pension · £18,606 more than your job

Permanent

£56,057

Monthly take-home: £4,088
Pension: £7,000
Tax and NI: £17,443

Ltd company

£70,557

Monthly take-home: £5,296
Pension: £7,000
vs your job: +£14,499

Umbrella

£67,116

Monthly take-home: £5,010
Pension: £7,000
vs your job: +£11,059

Sole traderBest

£74,663

Monthly take-home: £5,639
Pension: £7,000
vs your job: +£18,606

Day rate to match your job

Ltd company

£356

£144 under your rate

Umbrella

£397

£103 under your rate

Sole trader

£349

£151 under your rate

Limited company figures assume the contract is outside IR35. Inside IR35 you are taxed much like an employee, so the umbrella column is the one to read.

Here a sole trader keeps more than a limited company, because every pound of profit is paid out: corporation tax plus dividend tax (up 2 points from April 2026) costs more than income tax and Class 4 NI. A company comes out ahead when you leave profit in it, or pay more into the pension from it.

Where the money goes

Outside IR35: salary plus dividends. Tax, NI, corporation tax take 31% of the contract income. Worth the same as a £92,307 salary with your job's pension and benefits.

Your company
Contract income: 212 days × £500	£106,000.00
Expenses and running costs	−£2,500.00
Your director's salary	−£12,570.00
Employer NI on the salary	−£1,135.50
Company pension contribution	−£7,000.00
Profit before tax	£82,794.50
Corporation tax (22% effective)	−£18,190.54
Paid to you as dividends	£64,603.96
You
Salary	£12,570.00
Dividends	£64,603.96
Income tax on salary	£0.00
Employee NI	£0.00
Dividend allowance: £500 at 0%	£0.00
Dividend ordinary rate: £37,200 at 10.75%	−£3,999.00
Dividend upper rate: £26,904 at 35.75%	−£9,618.16
Take-home	£63,556.79

Annual figures for 2026/27, before VAT, with no student loan. The limited company pays out all of its profit and has no other employees, so it cannot claim the Employment Allowance.

Take-home plus pension by day rate

Permanent

Ltd company

Umbrella

Sole trader

Where a contracting line crosses the flat permanent line is that route's break-even day rate, with 212 paid days a year.

Sole trader+£18,606 vs job

This calculator turns a UK day rate into a year of take-home pay three ways (through your own limited company, through an umbrella company, and as a sole trader) and puts each next to a permanent salary. Enter your day rate, the days you expect to be off, and the job you are comparing against; costs, pension and umbrella fees are under the options.

The comparison counts take-home plus pension by default, because an employer's pension contribution is real money that a contractor has to pay for themselves. Switch it to take-home only to compare cash in your pocket.

How many days a contractor really works

A permanent salary pays you for 52 weeks. A contractor is only paid for the days they work, so the first job is to count them. There are 260 weekdays in a year. Take off holidays, bank holidays, sick days and training, and the time between contracts, and what is left is what you invoice.

The defaults are 25 days of holiday, 8 bank holidays, 5 days of sickness or training and 10 days between contracts, which leaves 212 paid days. Every 10 days you add to the bench costs roughly £2,400 of take-home at £500 a day, so it is worth being honest about gaps.

Limited company (outside IR35)

Your company invoices the client, pays its costs, pays you a small salary and pays the rest out as dividends after corporation tax. The calculator follows the usual pattern:

Director's salary of £12,570, the personal allowance. With no other employees the company cannot claim the Employment Allowance, so it pays 15% employer NI on the salary above £5,000 (£1,135.50), but the salary and that NI both reduce corporation tax.
Corporation tax at 19% on profits up to £50,000 and 25% from £250,000, with marginal relief in between that makes the rate on each extra pound 26.5%.
Dividends taxed after the £500 dividend allowance at 10.75% in the basic band, 35.75% in the higher band and 39.35% above £125,140 for 2026/27 (8.75% and 33.75% for 2025/26).
Pension paid by the company comes out before corporation tax and is not taxed as your income, which makes it the most efficient money a director can take.

Umbrella company (inside IR35)

If a contract is inside IR35, or you would rather not run a company, an umbrella employs you and pays you through PAYE. The agency pays the umbrella your full rate, and the umbrella takes its margin, employer NI at 15% and usually the 0.5% apprenticeship levy out of it before working out your gross pay. What is left is taxed like any salary.

That is why the umbrella column is always the lowest: you pay both sides of National Insurance. The calculator treats pension as salary sacrifice, which most umbrellas offer, so it saves employer NI as well as your tax and NI.

Sole trader

A sole trader pays income tax on the profit plus Class 4 NI at 6% between £12,570 and £50,270 and 2% above it. Class 2 NI is no longer payable at these profit levels. Pension contributions are paid personally: you pay 80%, the provider claims 20% from HMRC, and higher-rate relief comes through a wider basic-rate band.

Many agencies and larger clients will not engage a sole trader directly, which is why most day-rate contractors use a company or an umbrella, but the tax comparison is still useful.

Why a sole trader can beat a limited company

When a company pays out every pound of profit, each extra pound between £50,000 and £250,000 of profit pays 26.5% corporation tax and then 35.75% dividend tax: about 53p in total. A sole trader in the same place pays 40% income tax and 2% NI: 42p. Add accountancy and employer NI on the director's salary and, with the higher dividend rates from April 2026, a company that pays out everything often ends up behind.

A company still comes out ahead when you leave profit in it for a later year, pay more into a pension from it, or need limited liability. This calculator assumes everything is paid out so it compares like with like against a salary.

Worked examples (2026/27, England, default days and costs, no pension)

212 paid days, £1,000 expenses, £1,500 company running costs, £600 sole trader accountancy, £25 a week umbrella margin:

£300 a day (£63,600): limited company £46,714, umbrella £42,339, sole trader £47,271
£400 a day (£84,800): limited company £56,851, umbrella £52,985, sole trader £59,567
£500 a day (£106,000): limited company £66,862, umbrella £63,631, sole trader £70,983
£650 a day (£137,800): limited company £80,599, umbrella £75,792, sole trader £84,726

What day rate matches my salary?

Using the same defaults and comparing take-home only, the day rate needed to match a permanent salary (limited company, umbrella, sole trader):

£40,000: £205, £219, £193
£50,000: £252, £274, £239
£70,000: £343, £383, £332
£90,000: £459, £492, £426

Frequently asked questions

What is IR35?: IR35 is the set of rules that decides whether a contractor working through their own company is really a disguised employee. If a contract is inside IR35, the client or agency deducts PAYE tax and NI as if you were employed, so the limited company route no longer applies and the umbrella figures are the realistic ones.
How many days a year does a contractor work?: Usually somewhere between 200 and 225. There are 260 weekdays a year; take off around 33 days of holiday and bank holidays, a few sick or training days and any gaps between contracts. This calculator starts at 212.
What is the rule of thumb for converting a day rate to a salary?: Outside IR35 through a limited company, a day rate of about 0.5% of a salary gives similar take-home once holidays and gaps are counted, so £350 a day is roughly a £70,000 job. Inside IR35 you need around 10% more.
Is £12,570 the best director's salary?: For a one-person company it usually is. The salary uses your personal allowance, costs no income tax or employee NI, and together with its employer NI it saves corporation tax that is worth more than the NI costs. You can change it under Business costs.
Does VAT change my take-home?: Not directly. A VAT-registered company charges VAT on top of the day rate and passes it to HMRC, so enter the rate before VAT. The Flat Rate Scheme can leave a small gain, which this calculator does not include.
Why does the comparison include pension?: An employer pension contribution is part of your pay even though it never reaches your bank account. To compare fairly, the calculator assumes you pay the same amount into a pension while contracting; change it or switch the comparison to take-home only.

How many days a contractor really works

Limited company (outside IR35)

Umbrella company (inside IR35)

Sole trader

Why a sole trader can beat a limited company

Worked examples (2026/27, England, default days and costs, no pension)

What day rate matches my salary?

Frequently asked questions

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