Contractor Tax Calculator
Enter your day rate to compare two common routes: working outside IR35 through your own limited company, and working inside IR35 through an umbrella company.
Tax year 2026/27 · Estimates, not personal tax advice
Accountant, insurance, kit
Outside IR35
£68,515
£5,710 / month
Inside IR35
£65,809
£5,484 / month
Limited company
| Contract income | £110,000 |
| Corporation Tax | −£20,973 |
| Dividends paid | £72,321 |
| Personal tax | −£16,376 |
| Take-home | £68,515 |
Umbrella / PAYE
| Gross salary | £95,261 |
| Employer NI (from rate) | £13,539 |
| Income Tax + NI | −£29,452 |
| Take-home | £65,809 |
Difference: £2,707 a year. Assumes a £12,570 director's salary, all post-tax profit paid as dividends and no Employment Allowance. Excludes employer pension costs, holiday-pay arrangements and Apprenticeship Levy, which depends on the employer's pay bill and allowance. This comparison does not determine IR35 status; check the umbrella's pay illustration.
Rates and rules used
Tax year 2026/27Default year 2026/27 (6 April to 5 April). 2025/26 and 2024/25 figures are kept for comparison where the calculator offers a year choice.
- Income Tax bands, rates and Personal Allowance2026/27GOV.UK: Income Tax rates and allowances (opens in new tab)
- Employee Class 1 National Insurance rates and thresholds2026/27GOV.UK: National Insurance rates and category letters (opens in new tab)
- Dividend Allowance and dividend tax rates2026/27GOV.UK: Tax on dividends (opens in new tab)
- Corporation Tax main rate, small profits rate and marginal relief2026/27GOV.UK: Corporation Tax rates and reliefs (opens in new tab)
- Off-payroll working (IR35) rules2026/27GOV.UK: Understanding off-payroll working (IR35) (opens in new tab)
Independent site, not affiliated with HMRC. Always check GOV.UK for the latest figures.
How this calculation works
- 01Outside: pay a £12,570 salary, deduct expenses and employer NI, apply Corporation Tax.
- 02Pay remaining profit as dividends and apply personal tax.
- 03Inside: remove the umbrella margin, employer NI and 0.5% levy from the contract income.
- 04Run the remaining gross salary through PAYE.
Real payroll can differ because tax and NI are worked out per pay period, and your tax code may include adjustments HMRC hasn't told you about. See our methodology.
Assumptions we use
Limited company: a director's salary of £12,570, all remaining profit after Corporation Tax paid as dividends, and your own expenses figure. Umbrella: employer NI, the 0.5% Apprenticeship Levy and the umbrella margin come out of the contract rate before PAYE. Real results depend on your accountant's fees, pension planning and expenses.
Understanding your contractor tax calculator result
The comparison estimates how the same contract income flows through a limited company or an umbrella arrangement. It is a planning comparison, not a decision about employment status.
Comparing two day-rate offers
Scenario: Enter the rate, expected billable days, expenses and umbrella margin. Run the outside-company and inside-umbrella outcomes on matching assumptions.
How to use the result: Compare take-home pay and the deductions removed before PAYE. Also account for paid leave, insurance, accounting fees and gaps between contracts before choosing an offer.
Details to check before relying on the estimate
- Use realistic billable days rather than every weekday.
- Confirm whether the quoted umbrella rate includes employment costs.
- An IR35 status decision cannot be made from take-home pay.
Putting the estimate into perspective
Put each offer on a matching basis before comparing take-home. Billable days, fees, paid leave and gaps between contracts can outweigh a headline difference in day rate.
Frequently asked questions
What salary should a contractor director take?
Many take a salary at or near the Personal Allowance. Since employer NI now starts at £5,000, the most efficient figure depends on whether your company can claim the Employment Allowance.
Check it on GOV.UK: National Insurance rates and category letters (opens GOV.UK in a new tab) · Income Tax rates and allowances (opens GOV.UK in a new tab)
What is the difference between a limited company and umbrella contractor?
A limited company contractor controls their own pay and expenses, while an umbrella company runs payroll and deducts tax for you. Take-home pay and administration differ, so compare them before signing a contract.
Check it on GOV.UK: Income Tax rates and allowances (opens GOV.UK in a new tab) · National Insurance rates and category letters (opens GOV.UK in a new tab)
Does this calculator replace accountancy advice?
No. Company structure, dividends, salary and IR35 status all matter. Use it for a first estimate and ask a qualified accountant to confirm the details for your contract.
Check it on GOV.UK: Understanding off-payroll working (IR35) (opens GOV.UK in a new tab) · Tax on dividends (opens GOV.UK in a new tab)
Related calculators
- IR35 Calculator — Focus on the financial difference between status outcomes.
- Dividend Tax Calculator — Check tax on distributions from a limited company.
- Corporation Tax Calculator — Estimate the company tax due before dividends.
Related guides
- IR35 Explained — What IR35 is, who decides your status, how inside-IR35 contracts are taxed and what it means for your take-home pay.
- Dividend Tax Explained — How dividends are taxed in 2026/27 after the rates rose to 10.