Contractor Calculator 2026/27: Compare Your Take-Home Pay

Use the contractor calculator above

Enter your day rate (or annual contract value), the number of days you expect to bill, and your structure. The tool estimates your yearly take-home and effective tax for each option so you can compare like for like. Treat the output as a planning figure, then read on for how the numbers are built and where contractors most often trip up.

Contracting options explained

The reason a contractor calculator matters is that two people billing the identical day rate can walk away with thousands of pounds' difference, purely because of how they are paid. Before any maths, it helps to be clear on the three big choices in front of you.

The first is your trading structure: do you run your own limited company (you are the director and shareholder), or do you work through an umbrella company that employs you and runs you through PAYE? The second is your IR35 status on each contract: is the engagement "outside IR35" (genuinely a business-to-business arrangement) or "inside IR35" (HMRC treats you as a deemed employee for tax)? The third is the mix of salary and dividends you draw if you do run a limited company.

Those choices interact. Inside-IR35 work through your own company largely removes the tax advantage of being limited, which is why many inside-IR35 contractors move to an umbrella for simplicity. Outside-IR35 work is where a limited company usually wins. The calculator above lets you model each combination instead of taking a recruiter's word for which is "better".

How the contractor calculator works

At its core the tool does the same thing for every route: it works out your taxable income, applies 2026/27 Income Tax and National Insurance, and subtracts anything taken before it reaches you. The formula in plain words is:

Take-home pay = Gross contract income − Income Tax − National Insurance − (corporation tax and dividend tax, if limited) − (umbrella margin and employer costs, if umbrella) − pension.

For an umbrella contractor, the agency pays the umbrella an "assignment rate". Out of that comes the umbrella's margin, Employer's National Insurance, the Apprenticeship Levy and your holiday pay, leaving a lower gross salary. That salary is then taxed through PAYE like any employee: Income Tax using the £12,570 Personal Allowance and the 20%, 40% and 45% bands, plus employee Class 1 NI at 8% between £12,570 and £50,270 and 2% above. Many contractors are surprised that Employer's NI comes out of the assignment rate - it is a real cost the umbrella passes on, not a deduction the umbrella keeps.

For a limited company contractor working outside IR35, the company invoices the client, pays Corporation Tax on its profit, and you draw money as a small salary plus dividends. A common pattern is a director's salary around the Personal Allowance, then dividends on top. Dividends carry no National Insurance, but for 2026/27 the dividend tax rates have risen: the first £500 is tax-free, then 10.75% within the basic-rate band, 35.75% in the higher-rate band and 39.35% above. The calculator stacks your salary first, then your dividends, so each slice lands in the right band.

For inside-IR35 work, the fee payer (agency or client) deducts Income Tax and employee NI before you are paid, in the same way an umbrella would. Running it through your own company gives almost no benefit, so the take-home looks much like the umbrella figure.

Worked example: a £450-a-day contractor

Meet Priya, an IT contractor in Leeds on a £450 day rate who expects to bill 220 days in 2026/27 - a gross contract value of £99,000. Here is roughly how the routes compare. These are simplified, full-year estimates, not a payslip.

Outside IR35, limited company

Say her company has about £90,000 of profit after a £12,570 director's salary and modest expenses. The salary uses her Personal Allowance, so no Income Tax there. She then draws dividends. After Corporation Tax the company pays on its profits, she takes dividends up to a sensible level and pays dividend tax on the stacked slices: 0% on the first £500, 10.75% on dividends within the basic-rate band (taxable income up to £37,700), then 35.75% on the portion falling in the higher-rate band. Because dividends avoid National Insurance entirely and part of her income is taxed at the lower dividend rate, her overall effective tax is the lowest of the three routes. This is why outside-IR35 contractors gravitate to a limited company.

Inside IR35 (via the fee payer)

Now the whole £99,000 is treated like employment income. She pays Income Tax of 20% on taxable income up to £37,700, then 40% on the slice from £37,700 to the top of her income, plus employee NI at 8% between £12,570 and £50,270 and 2% above £50,270. There is no dividend route to soften it, so her take-home drops noticeably compared with outside IR35 - typically several thousand pounds a year on these numbers.

Umbrella company

Through an umbrella, the £99,000 assignment rate first loses Employer's NI (15% above the £5,000 secondary threshold), the umbrella's weekly or monthly margin and the Apprenticeship Levy. What remains is her gross PAYE salary, which is then taxed like the inside-IR35 figure. Her net is usually close to, and often a little below, the inside-IR35 limited figure, but she gains statutory rights, holiday pay and zero admin. For inside-IR35 work, that trade is often worth it.

The headline lesson: same £450 day rate, but Priya could keep a very different amount depending on status and structure. That is exactly the gap a status check with our IR35 calculator and the comparison above are there to expose.

2026/27 rates & thresholds used

These are the figures the contractor calculator applies for England, Wales and Northern Ireland. Scotland sets its own Income Tax bands - see the note below. Always confirm against the official source before making a decision.

Source: gov.uk Income Tax rates and gov.uk off-payroll working (IR35), checked for 2026/27.

Limited company vs umbrella: how to choose

There is no single right answer, but a few rules of thumb hold up well:

• Mostly outside-IR35 work and contracting long term? A limited company usually gives the best take-home, because of the salary-plus-dividends mix and no NI on dividends. The cost is real admin: accounts, Corporation Tax, VAT if you register, and a Self Assessment return.
• Mostly inside-IR35 work, or contracting short term? An umbrella is simpler and the take-home is similar to running an inside-IR35 contract through your own company. You get holiday pay and statutory benefits, and you avoid winding a company up later.
• A mix? Some contractors keep a limited company for outside-IR35 contracts and use an umbrella when a specific role is inside IR35. That flexibility has an admin cost but keeps each contract in the most efficient route.

To go deeper on a single structure, compare the dividend-and-salary maths with our salary vs dividend calculator, model the full company picture with the limited company tax calculator, or check what an umbrella leaves you using the umbrella company calculator.

Inside vs outside IR35: why it changes everything

IR35 is the single biggest lever on a contractor's take-home, and it is decided per contract, not per person. Outside IR35 means HMRC accepts you are genuinely in business on your own account - you can use the limited-company efficiencies. Inside IR35 means you are taxed broadly as an employee on that engagement, so the dividend route disappears.

Since April 2021, for medium and large private-sector clients (and all public-sector ones), the client decides your status, not you. They issue a Status Determination Statement. Small clients are an exception - there, the contractor's own company still makes the call. Getting the determination wrong is expensive, so it is worth running the engagement through our dedicated IR35 status checker and reading the official guidance before you accept terms.

What affects your take-home pay

Beyond status and structure, several things shift the final figure the calculator cannot always know up front:

• Pension contributions. Employer pension contributions from a limited company are usually allowable against Corporation Tax and avoid both Income Tax and NI, making them one of the most efficient ways to extract value.
• Expenses. Genuine business costs reduce company profit and therefore tax, but inside-IR35 and umbrella contractors can claim very little day to day.
• The £100,000 trap. Above £100,000 of adjusted income, your Personal Allowance is cut by £1 for every £2, creating an effective 60% marginal rate between £100,000 and £125,140. High day-rate contractors often pension down to stay under it.
• VAT. If your turnover crosses the VAT threshold you must register; the Flat Rate Scheme can sometimes leave a small surplus, but it does not change your personal Income Tax.

Common mistakes contractors make

A few errors come up again and again, and they cost real money:

• Confusing the assignment rate with gross pay. The umbrella's assignment rate includes Employer's NI and the Apprenticeship Levy, which come out before your taxable salary. Compare a limited company day rate with an umbrella assignment rate, not its take-home, or you will compare apples with pears.
• Assuming all work is outside IR35. Status is set per contract by the client for most engagements. Drawing dividends on income that is actually inside IR35 can trigger an HMRC bill years later.
• Forgetting payments on account. Self Assessment can demand two advance payments towards next year's tax, each due 31 January and 31 July. New contractors are routinely caught out by a January bill that is 150% of what they expected.
• Ignoring Scotland. Scottish taxpayers pay Scottish Income Tax rates and bands on salary and self-employment income (the Personal Allowance is still UK-wide). Dividend and savings tax stay at UK rates. A Glasgow contractor and a Manchester contractor on the same salary will not have the same Income Tax.
• Drawing dividends with no retained profit. Dividends can only be paid from post-tax profit. Taking more than the company has made creates an illegal dividend and, often, an overdrawn director's loan with its own tax charge.

Where Scotland differs

If you are tax-resident in Scotland, your salary and any self-employed profit are taxed using the Scottish bands and rates, which include a 19% starter rate, a 21% intermediate rate and higher top rates than the rest of the UK. The £12,570 Personal Allowance and the £100,000 taper still apply. Dividends, however, are taxed at the same UK-wide dividend rates wherever you live, so a limited-company contractor's dividend planning is broadly the same north and south of the border. Always model your specific bands rather than assuming the England figures.

What to do next

Run your real day rate and expected billable days through the calculator above for each structure, then pressure-test the IR35 status of your actual contract. If you are outside IR35 and contracting for the long haul, a limited company plus pension contributions usually wins; if you are inside IR35 or only contracting briefly, an umbrella keeps life simple for a small cost. When the numbers are close, simplicity and your appetite for admin should decide it.

These results are estimates for guidance only and not personal tax or financial advice. For a decision involving thousands of pounds, confirm the figures with a qualified accountant and the official gov.uk guidance.

Related tools: the contractor day rate calculator to convert a salary into a day rate, the National Insurance calculator to see your NI in detail, and the self-employed tax calculator if you trade as a sole trader rather than through a company.

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