UK contractor take-home pay calculator

Inside or outside IR35?

IR35, the off-payroll working rules, decides whether you are taxed like an employee. For medium and large clients in the private sector, and for all public sector clients, the client decides your status and must give you a status determination statement. A private sector client is medium or large if it meets two of these for two years in a row: turnover over £10.2 million, balance sheet over £5.1 million, more than 50 employees. Higher limits of £15 million and £7.5 million apply from 2027/28 at the earliest. With small clients, your own company decides.

Inside IR35, the agency or client deducts income tax and National Insurance, and pays employer National Insurance itself; in practice most inside-IR35 work is paid through an umbrella company. Outside IR35, your company is paid in full and you pay yourself a salary and dividends.

How the umbrella route works

The umbrella company employs you. From the fees the agency pays, it takes its margin and the employer costs (employer National Insurance at 15% above £5,000, the Apprenticeship Levy where it applies, and employer pension contributions), and pays you the rest as salary through PAYE, including holiday pay. Margins are not regulated; HMRC's own example is £20 a week. Be wary of schemes that promise much higher take-home pay: HMRC warns that non-compliant umbrellas keep 15% to 22% of pay. Since 6 April 2026 the agency or client is jointly responsible for the umbrella's PAYE.

How the limited company route works

Your company invoices the client, pays you a small salary and pays Corporation Tax on the profit: 19% up to £50,000, 25%from £250,000, with marginal relief in between, which works out at 26.5% on each extra pound in that range. What is left can be paid to you as dividends: the first £500 is tax-free, then 10.75%, 35.75% or 39.35%depending on your tax band.

Assumptions

• Fees exclude VAT. All profit is paid out as dividends in the same tax year; keeping some in the company lowers personal tax now.
• Limited company: one director and no other employees, so no Employment Allowance; no pension contributions, no associated companies.
• Umbrella: yearly figures for the whole assignment, a weekly margin for each working week (days ÷ 5), and the auto-enrolment minimum of 5% from you and 3% from the umbrella on qualifying earnings between £6,240 and £50,270, taken before tax.
• Scottish rates apply to salary only; dividends use the UK rates for everyone.
• Student loans, other income and benefits in kind are not included.

Frequently asked questions

How much is £500 a day after tax in the UK?

Over 220 working days (£110,000 of fees) in 2026/27, about £63,746 a year through an umbrella company, plus £3,522 into your pension, or about £69,932 through your own limited company outside IR35 with a £12,570 salary.

Umbrella company or limited company?

If the work is inside IR35, you are taxed like an employee either way and most agencies pay you through an umbrella company. If it is genuinely outside IR35, a limited company usually leaves more, because company profit pays Corporation Tax and then dividend tax instead of employer and employee National Insurance. It also means running a company: accounts, a tax return for the company and more responsibility.

What director salary should I take in 2026/27?

A salary up to the £12,570 Personal Allowance is usually the most tax-efficient for a one-director company: the salary and the employer National Insurance on it reduce Corporation Tax, and income tax and employee National Insurance only start at £12,570. A salary of at least £6,708 also gives you a qualifying year for the State Pension. Single-director companies cannot claim the Employment Allowance.

Did dividend tax go up in 2026?

Yes. From 6 April 2026 the dividend ordinary rate is 10.75% and the upper rate 35.75%, two points higher than before. The additional rate stays at 39.35% and the dividend allowance at £500.