IR35 Take-Home Comparison Calculator, 2026/27

How this is calculated

An umbrella company employs you and receives the full contract value from the agency or client, deducts its own margin and employer National Insurance, then processes the remainder as PAYE salary with income tax and employee NIC applied in the normal way. Holiday pay is usually included within this gross figure rather than being an additional payment, which can make umbrella pay slips look more generous than they are until you check the breakdown.

A limited company outside IR35 instead deducts genuine running costs and a salary set at the 2026/27 personal allowance from the same contract value, pays corporation tax on the remaining profit, and distributes the rest as dividends, which are taxed at lower rates than salary and carry no NIC at all.

Why the limited company route usually comes out ahead

The umbrella route effectively bears full employer NIC on almost the whole contract value on top of employee NIC and income tax, while a limited company shifts most of the same income into dividends, which avoid NIC entirely and are taxed at rates below equivalent salary income. This structural difference typically produces noticeably higher take-home pay through a limited company for the same day rate, assuming the engagement is genuinely outside IR35.

Umbrella arrangements remove the administrative burden of running a company, filing accounts and managing corporation tax, which is a real convenience some contractors value even at a lower net income, particularly for short-term or inside IR35 assignments where a limited company offers no tax advantage anyway.

When umbrella is unavoidable

If your contract has been determined to be inside IR35, using a limited company generally offers no tax advantage over an umbrella company because the deemed payment rules apply either way, so many contractors choose umbrella for its simplicity in that situation. Some agencies also only work with umbrella companies for shorter engagements or in sectors with widespread historic IR35 non-compliance.

Always check exactly what an umbrella company's margin covers, and confirm holiday pay, pension auto-enrolment and any additional charges before signing up, since these vary considerably between providers and can materially affect your actual take-home pay.

Is an umbrella company the same as being inside IR35?

Not exactly the same thing, but they are usually used together. An umbrella company simply employs you and processes PAYE; you can technically use one for an outside IR35 contract too, though it offers no tax advantage over a limited company in that case.

Why does my umbrella payslip show a higher gross pay than my day rate suggests?

Umbrella payslips typically show the full contract value including employer NIC and the umbrella's margin as part of your gross pay, which is then deducted before you reach your actual gross taxable salary, making the top-line figure look larger than what you receive.

Do I get holiday pay on top of my umbrella pay?

Usually not as an extra payment; most umbrella companies calculate holiday pay as part of your existing gross pay under 'rolled-up' holiday pay, meaning it is already included rather than paid separately when you take time off.

Is it worth setting up a limited company for a short inside IR35 contract?

Generally no, because inside IR35 income is taxed in a very similar way whether it passes through a limited company or an umbrella company, so the extra cost and administration of running a company rarely pays off for a short inside IR35 assignment.