Limited company vs umbrella calculator, 2026/27

How this is calculated

For the limited company route, the calculator deducts your chosen salary and employer's National Insurance (using the secondary threshold and employer rate for the year) and any allowable expenses from gross contract income to reach taxable profit. Corporation tax is then applied at 19%, 25% or the marginal relief rate depending on profit level, and the remainder is treated as dividends.

Personal tax is then calculated on the salary plus dividends using the current personal allowance, basic and higher rate bands, the dividend allowance and the dividend tax rates for the year, plus employee National Insurance on the salary.

For the umbrella route, the day rate is treated as the umbrella's contract income, from which the umbrella deducts its margin and employer's National Insurance before paying you a gross salary, which is then taxed as normal employment income through PAYE.

Why the two routes differ

A limited company generally produces higher take-home pay because profits extracted as dividends are not subject to National Insurance, only corporation tax and dividend tax. An umbrella salary is subject to both employee and employer National Insurance in full, with the employer's share effectively passed on to you through a lower gross salary.

The trade-off is administrative: running a limited company means filing accounts, a corporation tax return and managing IR35 status, whereas umbrella employment is largely hands-off but comes with an ongoing margin deduction.

Other factors to weigh up

This calculator ignores accountancy costs (typically £100 to £200 a month for a contractor limited company), which reduce the limited company advantage slightly. It also ignores your IR35 status: if your contract is inside IR35, most of the limited company tax advantage disappears because deemed employment rules apply.

Pension contributions made directly by the limited company are a tax-efficient way to extract value without triggering income tax or National Insurance, and are not reflected in this simple comparison.

Is a limited company always better than umbrella for contractors?

Not always. It is usually better financially if your contract is genuinely outside IR35, but the gap narrows once you account for accountancy fees, admin time and the extra responsibility of running a company. Inside IR35, the two routes produce similar take-home pay.

Does the umbrella margin come out of my pay?

Yes. The umbrella deducts its margin from the assignment rate before calculating employer National Insurance and your gross pay, so the margin is effectively funded by you, not the agency or client.

Why does employer National Insurance appear in an umbrella calculation?

Umbrella companies are the legal employer, so they must pay employer National Insurance and the Apprenticeship Levy out of the contract rate before paying your salary, which is why umbrella take-home is usually lower than a straightforward limited company comparison suggests.

Should I include VAT in this comparison?

No. Both routes typically charge VAT on top of the day rate if VAT registered, and it is passed to HMRC rather than kept, so it does not affect the take-home comparison shown here.