Contractor Income Comparison: What Will You Actually Take Home?
The same day rate can result in vastly different take-home pay depending on your IR35 status, company structure, and how you extract profits. This calculator shows the complete picture — side by side.
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Whether you're operating through a limited company outside IR35, working inside IR35 via an agency, or considering an umbrella company, the tax treatment differs significantly. An outside IR35 contractor on £500/day could take home £15,000+ more per year than the same contractor inside IR35 — but there are trade-offs in compliance, risk, and administrative burden.
This tool uses the same calculation engine across all scenarios, so you can compare like for like. It also shows what permanent salary you'd need to match your contracting income, helping you decide whether contracting is worth it.
Your Contract Details
Enter your day rate or annual contract value to compare options
Side-by-Side Comparison
Based on a £500/day rate over 220 working days
Outside IR35(Ltd Co) | Inside IR35(Deemed PAYE) | Umbrella(£25/wk) | Permanent(Equivalent) | |
|---|---|---|---|---|
| Gross annual | £110,000 | £110,000 | £110,000 | £110,000 |
| Total tax & deductions | £43,871 | £43,586 | £44,418 | £43,143 |
| Net annual | £66,129 | £66,414 | £65,582 | £66,857 |
| Net monthly | £5,511 | £5,534 | £5,465 | £5,571 |
| Effective tax rate | 39.9% | 39.6% | 40.4% | 39.2% |
Outside IR35 — Limited Company
Optimal salary/dividend strategy for your limited company
Optimal salary
£12,570
Dividends
£70,851
Corporation tax
£20,443
Net income
£67,696
Employer NI: £1,136 · Personal tax: £0 · Dividend tax: £15,726
Effective rate: 35.5% · Retained profits available: £0
Salary strategy comparison:
| Strategy | Salary | Total tax | Net income |
|---|---|---|---|
| £5,000 salary | £5,000 | £38,057 | £66,943 |
| £12,480 salary | £12,480 | £37,313 | £67,687 |
| £12,570 salary | £12,570 | £37,304 | £67,696 |
| £50,270 salary | £50,270 | £40,158 | £64,842 |
Inside IR35 (Deemed PAYE)
Treated as an employee for tax — PAYE deductions apply
Income tax
£25,954
Employee NI
£3,937
Employer NI
£13,696
Net income
£66,414
Deemed payment: Inside IR35, the fee-payer deducts employer NI from your assignment rate before calculating your gross salary. A 5% flat-rate expense allowance can offset this slightly, reducing the deemed payment by £5,500.
Umbrella Company
Similar to inside IR35 but with additional umbrella company fees
Income tax
£25,380
Employer NI (you pay)
£13,480
Umbrella margin
£1,650
Net income
£65,582
How umbrella works: Your employer NI (£13,480) and apprenticeship levy are deducted from your assignment rate, plus the umbrella company charges £25/week (£1,650/year). This leaves less gross salary for PAYE.
Permanent Salary Equivalent
What permanent salary matches your contracting income?
To match your outside IR35 net income of £66,129, you'd need a permanent salary of approximately
£107,794
Gross salary
£110,000
Net take-home
£66,857
Holiday pay (28 days)
£11,846
Employer pension (3%)
£3,300
Permanent roles include employer pension (typically 3-5%), 28 days paid holiday, statutory sick pay, and employment rights protection. The true compensation value is higher than the headline salary.
Tax Optimisation Tips
Contextual advice based on your situation
Pension contributions via your company
Employer pension contributions are a tax-deductible expense — they reduce your corporation tax bill and aren't subject to NI.
Calculate pension tax reliefSalary sacrifice options
If inside IR35 or permanent, salary sacrifice saves both employee and employer NI on top of income tax relief.
Calculate salary sacrifice savingsClaim working from home relief
If you work from home, you may be able to claim £6/week tax relief without receipts.
Check your WFH tax reliefSelf-employed vs limited company?
At higher incomes, a limited company structure typically saves significant tax compared to sole trading.
Compare structuresWhat Day Rate Do I Need?
Enter your target monthly take-home to find the required day rate
Frequently Asked Questions
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