Contractor Take-Home Pay Calculator UK
Compare inside IR35, outside IR35 (Ltd), and PAYE equivalent. See the real difference.
Gross: £115,000/yr (£9,583/mo)
Outside IR35 (Ltd)
£71,177
£5,931/mo
36.0% effective tax
Inside IR35
£68,460
£5,705/mo
30.7% effective tax
PAYE Equivalent
£62,365
£5,197/mo
~£97,750 gross salary
Outside IR35 pays £2,717/year more than inside IR35
That's £226/month difference
Detailed Breakdown
What About Umbrella Companies?
An umbrella company employs you and handles PAYE, NI, and pension. Your take-home is similar to Inside IR35 but with additional umbrella fees (typically 3-5% or a flat £20-30/week). Choose umbrella when your client requires it or when you want zero admin overhead.
Typical umbrella take-home = Inside IR35 take-home minus £1,000-2,000/year in fees.
Contractor Tax Comparison UK 2025/26
Outside IR35 (Ltd Company): You pay yourself a small salary (£12,570) and take the rest as dividends. Corporation tax at 19-25%, then dividend tax at 8.75-33.75%. Most tax-efficient option.
Inside IR35: Your client deducts tax and NI at source, similar to PAYE. You get a 5% expense allowance but lose the dividend tax advantages.
PAYE Equivalent: What you'd earn as a permanent employee. Estimated at 85% of contractor gross (accounting for agency/employer costs, holidays, pension, benefits).
About the Contractor Tax Calculator
The way a contractor pays tax depends entirely on their working arrangement and IR35 status. IR35 is the off-payroll working legislation that determines whether a contractor should be taxed as an employee or can benefit from the tax efficiencies of operating through a limited company. Since April 2021, medium and large private sector clients are responsible for determining IR35 status, not the contractor themselves.
Outside IR35, a contractor operating through a limited company can extract profits via the optimal salary/dividend strategy — typically taking a small salary at the NI threshold and the rest as dividends. This saves thousands compared to PAYE employment. Inside IR35, the end client (or agency) must deduct PAYE tax, employee NI, and pay employer NI before passing the net amount to your company, leaving very little tax advantage. Umbrella companies offer simplicity but no tax savings — they employ you and deduct PAYE as normal.
How to Use This Calculator
- Enter your contract day rate and expected working days per year
- Select your IR35 status (inside, outside, or compare both)
- Choose your operating structure (Ltd company, umbrella, or sole trader)
- Add business expenses and pension contributions if applicable
- Compare the net take-home pay across different structures to see the true difference
Key Facts
A contractor earning £500/day (220 days) outside IR35 via a Ltd company typically retains around 75-80% of gross income, compared to 55-60% for the equivalent permanent salary. Inside IR35, the advantage shrinks to just 2-5% over PAYE. Key IR35 indicators include right of substitution, control over how work is done, and mutuality of obligation. If caught inside IR35 retrospectively, penalties can include back-taxes, interest, and fines covering multiple years.