How much take-home pay can I expect as a contractor UK?

As a rough guide for 2026/27: a £400/day contractor (220 days = £88,000) can expect approximately £55,000–£58,000 net through PAYE or umbrella, or around £67,000–£70,000 through a limited company outside IR35. Actual figures depend on expenses, salary/dividend split, accountancy costs, and IR35 status.

What is inside IR35 take-home pay UK?

Inside IR35, your take-home is broadly the same as PAYE employment · full income tax and National Insurance applies to your contract income. You cannot use the salary/dividend split that makes limited companies tax-efficient. For a £400/day contractor inside IR35, take-home is typically £53,000–£57,000 per year depending on expenses and the fee-payer's approach.

PAYE vs Umbrella vs Limited Company Calculator 2026/27

Q: PAYE vs umbrella vs limited company · which is best UK?

For contractors outside IR35, a limited company typically gives the highest take-home pay by combining a low salary with dividends taxed at lower rates. Umbrella companies are simpler and give employment rights but result in lower take-home than limited company outside IR35. PAYE is simplest but usually the lowest net pay. Inside IR35, umbrella and PAYE produce similar results.

Best Option for You

Annual net: £·

Side-by-Side Comparison

Item	PAYE	Umbrella	Ltd Co.
Contract Gross	£0	£0	£0
Employer NI	£0	£0	£0
Umbrella Fee	·	£0	·
Corporation Tax	·	·	£0
Income Tax	£0	£0	£0
Employee NI	£0	£0	£0
Pension	£0	£0	£0
Annual Take-Home	£0	£0	£0
Effective Rate	0%	0%	0%

Enter your contract rate to compare the three structures.

Visual Breakdown · Gross / Tax / NI / Net

Which Structure Is Right for You?

PAYE

Simplest · employer handles all tax
Statutory employment rights (holiday pay, sick pay)
No accounting costs
Lowest take-home of the three
Best for: risk-averse, short contracts

Umbrella

No need to form a company
Some employment rights retained
Small weekly margin charged
Employer NI absorbed from contract rate
Best for: mid-term IR35 contracts

Ltd Co.

Highest take-home (outside IR35)
Dividend tax rates lower than income tax
Expenses reduce company profit
Admin overhead + accountant fees
Best for: long-term outside IR35

How the Calculations Work (2026/27)

PAYE: Contract gross treated as employment income. Income tax is calculated above the personal allowance of £12,570 (basic 20% to £50,270; higher 40% to £125,140; additional 45% above). Employee NI: 8% on £12,570–£50,270 and 2% above. Employer NI at 15% above the £5,000 secondary threshold is a separate cost to the engager.

Umbrella: The umbrella company deducts employer NI (15% above £5,000 p.a.) and its weekly margin from your contract rate, then pays you the remainder as employment income subject to PAYE income tax and employee NI.

Limited Company (outside IR35): Company revenue less director salary, employer NI on salary above £5,000, and claimed expenses = profit. Corporation tax at 25% applies (main rate). Remaining profit can be drawn as dividends: £500 tax-free, then 8.75% (basic rate taxpayer) or 33.75% (higher rate). If inside IR35, all income is treated as employment income with deemed payment rules, broadly equivalent to PAYE.

PAYE vs Umbrella vs Limited Company · Take-Home Comparison 2026/27

Day rate contractor comparison at common rates. Ltd figures assume 80% salary/20% dividend split, outside IR35.

Day Rate	Annual (220 days)	PAYE Take-Home	Umbrella Take-Home	Ltd Company Take-Home	Ltd Advantage
£250/day	£55,000	£38,300	£37,200	£43,800	+£5,500 vs PAYE
£350/day	£77,000	£49,700	£48,200	£59,400	+£9,700 vs PAYE
£450/day	£99,000	£61,100	£59,200	£73,800	+£12,700 vs PAYE
£550/day	£121,000	£71,500	£69,200	£86,800	+£15,300 vs PAYE
£650/day	£143,000	£81,900	£79,200	£99,600	+£17,700 vs PAYE

Inside IR35 contractors pay employee tax rates through PAYE regardless of company structure · similar to the PAYE column above.

Contractor Structure FAQs

PAYE vs umbrella vs limited company · which is best UK?

For contractors outside IR35, a limited company gives the highest take-home by combining a low salary with dividends taxed at lower rates (8.75% basic, 33.75% higher). Umbrella companies are simpler and provide employment rights but result in lower take-home. PAYE is the simplest structure but typically the lowest net pay. Inside IR35, umbrella and PAYE produce broadly similar results · the Ltd advantage disappears.

Inside vs outside IR35 · what is the take-home difference?

Outside IR35, a limited company contractor can take a low salary (e.g. £12,570) and extract remaining profits as dividends, significantly reducing income tax and NI. Inside IR35, full PAYE income tax and employee/employer NI applies regardless of company structure, resulting in take-home similar to permanent employment. The difference can be £5,000–£15,000+ per year depending on contract rate.

How much do I keep as a limited company contractor UK?

As a rough guide for 2026/27, a limited company contractor outside IR35 typically keeps 65–72% of their gross contract income after corporation tax, salary tax, NI and dividend tax. At £400/day (£88,000/year), take-home is typically around £62,000–£68,000. Actual figures depend on expenses claimed, salary/dividend split, accountancy costs (typically £1,000–£2,500/yr) and personal circumstances.

How much do umbrella companies charge UK 2026?

Umbrella company fees in 2026 typically range from £15–£30 per week, or £60–£130 per month, though some charge a flat monthly fee of £20–£25. These margins are deducted before PAYE is applied. Watch out for umbrella companies promoting tax avoidance schemes · HMRC actively pursues these and the contractor remains liable for unpaid tax. Use only FCSA or Professional Passport accredited umbrella companies.

Is it worth setting up a limited company?

For contractors working outside IR35 on day rates above roughly £300–£350, the tax efficiency of a limited company typically outweighs the additional accounting fees (usually £1,000–£2,500 per year). The key benefit is taking profits as dividends, taxed at 8.75% (basic rate) rather than 20% income tax · saving thousands annually. If your contract is inside IR35, the advantage largely disappears. Always seek advice from a specialist contractor accountant.

What employer NI rate applies in 2026/27?

The employer (secondary) NI rate is 15% from April 2025 onwards, applied on employment income above the secondary threshold of £5,000 per year. For umbrella workers, this cost is deducted from the contract rate before PAYE is applied. For limited company directors, employer NI on the salary portion is a deductible business expense. Both costs are factored into the calculator above.

How are dividends taxed in 2026/27?

The dividend allowance is £500 per year. Dividends above the allowance are taxed at 8.75% (basic rate), 33.75% (higher rate), or 39.35% (additional rate). Because dividend rates are lower than income tax rates, limited company contractors outside IR35 significantly boost take-home by paying a low salary and taking remaining profits as dividends. This is the primary tax advantage of the Ltd company structure.