Compare your take-home pay across all three contractor options — outside IR35, inside IR35, and umbrella company — side by side.
Outside IR35
Ltd Company
£65,162
per year · £5,430/mo
Effective tax
37.0%
You keep
63.0%
Inside IR35
Ltd Company
£60,276
per year · £5,023/mo
Effective tax
41.8%
You keep
58.2%
vs best
−£4,887
Umbrella
PAYE
£59,728
per year · £4,977/mo
Effective tax
42.3%
You keep
57.7%
vs best
−£5,435
| Day rate | Outside IR35 | Inside IR35 | Umbrella |
|---|---|---|---|
| £300/day | £48,870 | £43,841 | £43,293 |
| £400/day | £59,732 | £54,797 | £54,249 |
| £500/day | £70,593 | £65,754 | £65,206 |
| £600/day | £80,826 | £73,899 | £73,540 |
| £750/day | £94,415 | £87,255 | £86,754 |
| £1000/day | £120,048 | £112,285 | £111,784 |
Based on 5 days/week, 46 weeks/year. Outside IR35 assumes £12,570 salary, £3,600 expenses. Umbrella assumes £25/week margin.
IR35 is UK tax legislation that determines whether a contractor is genuinely self-employed or a "disguised employee" for tax purposes. If your contract falls inside IR35, your income is taxed as employment income — meaning you pay full income tax and National Insurance, with employer NI deducted from your contract rate. If you're outside IR35, you can operate through a limited company and pay yourself a tax-efficient mix of salary and dividends.
Since April 2021, medium and large private-sector clients are responsible for determining your IR35 status via a Status Determination Statement (SDS). For small companies, contractors can still self-assess. HMRC provides the CEST tool for guidance, though many contractors seek specialist IR35 insurance or legal reviews.
Working outside IR35 through your own limited company is the most tax-efficient option. The typical strategy for 2026/27 is to pay a director's salary of £12,570 (the personal allowance — no income tax, and it earns a State Pension qualifying year; employer NI of £1,135.50 is payable but is deductible against Corporation Tax) or £5,000 (the employer NI secondary threshold — no NI at all, but it is below the £6,500 Lower Earnings Limit so it does not count towards your State Pension; a salary between £6,500 and £12,570 keeps the qualifying year). Remaining profits are subject to Corporation Tax at 19% on profits up to £50,000, 25% above £250,000, and an effective rate in between under marginal relief (the calculator applies this), and extracted as dividends taxed at 10.75% (basic), 35.75% (higher), or 39.35% (additional) above the £500 dividend allowance — the basic and higher dividend rates rose by 2 percentage points on 6 April 2026. Worked examples for directors are in our guide to dividend tax rates for 2026/27.
You can also claim allowable business expenses — accountancy fees (£80–£150/month), professional indemnity insurance, equipment, and travel to temporary workplaces — reducing your Corporation Tax bill. The key tests for outside IR35 are: genuine right of substitution, control over how/when/where you work, and no mutuality of obligation. If you also have sole-trader or property income over £50,000, check whether Making Tax Digital for Income Tax applies to you.
When your contract is inside IR35, you're treated as a deemed employee. Employer NI (15%) and Apprenticeship Levy (0.5%) are deducted from your contract rate — not paid on top by the client. What remains is your deemed salary, subject to standard PAYE deductions: income tax and employee NI.
In the calculator above, at £300 to £600 a day (5 days a week for 46 weeks, a £12,570 director salary, £3,600 of expenses, no pension, England, Wales and Northern Ireland rates, 2026/27), working outside IR35 leaves £2,270 to £4,646 a year more take-home than inside IR35. Your own figures depend on your rate, expenses and pension, so put them in the calculator. If all your contracts are inside IR35, you may find an umbrella company simpler than maintaining a limited company.
An umbrella company acts as your employer. They receive your contract payments, deduct their weekly margin (typically £25–£40), employer NI, and Apprenticeship Levy, then pay you the remainder through PAYE. You get a payslip like any other employee, so the take-home is worked out as on any PAYE salary (the UK salary calculator does the same sum for a permanent job). It's the simplest option — no company accounts, no Corporation Tax returns.
The take-home from an umbrella is very similar to inside IR35 via a limited company, minus the umbrella's weekly fee. Choose an FCSA-accredited umbrella with transparent fees. Avoid schemes promising unusually high take-home pay — HMRC actively investigates these.
Outside IR35 means you're genuinely self-employed and can pay yourself via salary and dividends through a limited company. Inside IR35 means you're a deemed employee — employer NI is deducted from your contract rate, and you pay standard PAYE tax. In this calculator, at £300 to £600 a day (5 days a week for 46 weeks, a £12,570 director salary, £3,600 of expenses, no pension, England, Wales and Northern Ireland rates, 2026/27), outside IR35 leaves £2,270 to £4,646 a year more take-home than inside IR35. Put in your own rate to see yours.
If your work is outside IR35, a limited company gives the best take-home pay. If all your work is inside IR35, an umbrella company is simpler. In this calculator, at £300 to £600 a day with a £25 weekly umbrella margin, the umbrella leaves £378 to £577 a year less than a limited company inside IR35, before the company's accountancy and running costs. If you mix inside and outside contracts, keep your limited company for flexibility.
The two common choices are £12,570 (the personal allowance — no income tax, a State Pension qualifying year, employer NI of £1,135.50 which is Corporation Tax deductible) or £5,000 (the employer NI threshold — no NI at all, but below the £6,500 Lower Earnings Limit so no State Pension qualifying year). Most sole directors without other income choose £12,570; compare both in the calculator's advanced options.
Income Tax (England, Wales & NI)
National Insurance
Corporation Tax
Dividend Tax