Contractor take home pay calculator: umbrella and limited company on the same rate

What a contractor calculator should work out, step by step

1. Convert the rate into a year you believe. Multiply the day rate by the weeks you expect to bill rather than by a full year. Two weeks of holiday, a week of illness and a four-week gap between contracts is a normal year and takes a meaningful slice off the annualised figure before any tax is considered.
2. Umbrella: start from the assignment rate. Through an umbrella the rate the client pays funds employer National Insurance, the Apprenticeship Levy where it applies, holiday pay and the umbrella's margin, and what is left becomes your gross pay, taxed under PAYE. Ask for a full illustration showing every one of those lines before you sign.
3. Limited company: work down from company income. Outside the rules, the fee is company income. Deduct genuine business costs, apply corporation tax to the profit, then decide the salary and dividend split and any company pension contribution. Each of those decisions moves the net figure, so a single outside number always assumes a plan you have not seen.
4. Put the running costs where you will see them. Accountancy, professional indemnity and public liability cover, a business bank account, software and any subscriptions the client expects you to carry. They are modest individually and they are the difference between the two routes looking close and looking far apart.
5. Remember the student loan on an inside engagement. GOV.UK states that deemed employers do not deduct student or postgraduate loan repayments from an off-payroll worker's fees: you register for Self Assessment and pay them yourself. On a graduate rate that is a four-figure bill that no deemed-employment payslip warned you about.
6. Compare against the salary the job would pay. The comparison that matters when deciding whether to contract at all is not umbrella against limited, it is your net against a permanent salary with holiday, sick pay, employer pension and notice. Price those in and a rate that looked like a large rise sometimes is not one.

Common questions

What is a fair contractor day rate compared with a salary?

There is no fixed multiplier worth quoting, because it depends on billable weeks, the status of the engagement and the benefits you give up. Work the rate into an annual net on the weeks you expect to bill, then compare that with the salary net for the same role.

Is umbrella take-home always lower than limited company?

Usually on higher rates and longer engagements, but not always: the umbrella has no accountancy fee, no company filings and funds statutory holiday, and on inside engagements the company route does not recover what a deemed employer has already deducted.

What percentage should a contractor pay calculator say I keep?

Any figure quoted without your rate, your status, your route and your pension plan is marketing. Run your own numbers, because the honest answer varies by more than the gap between the routes.

Do I need an accountant to contract?

Not legally, and in practice almost always if you run a limited company: the filings, the split, the deadlines and the treatment of costs are where the money is either kept or lost. Through an umbrella there is nothing for an accountant to do.

What should a contractor salary calculator UK show that a payslip calculator does not?

Two things a payslip never has to decide: the status of the engagement and the route you are paid through. A salary calculator starts from a gross that somebody else has already set, while a contractor one has to work down from the rate, take the employment costs out of it where the route carries them, and only then run the statutory deductions. A tool that skips either decision is quoting a number for a job you are not doing.

Is a UK contractor calculator different from an employee one?

The tax rules underneath are identical: the same allowance, the same bands, the same National Insurance thresholds. What differs is what reaches them. An employee's gross is their salary; a contractor's gross is whatever survives the assignment rate after employer National Insurance, the Apprenticeship Levy, holiday pay and a margin on the umbrella route, or after corporation tax and the salary and dividend split on the limited company route.

Take-home pay by jurisdiction

• Take-home pay in United Kingdom