Target income calculator, 2026/27
Rather than guessing at a day rate, tell this calculator the take-home pay you want each year and it works backwards through corporation tax, dividend tax and running costs to show the gross contract income and day rate you need in 2026/27.
The target income calculator runs on the rates and thresholds HMRC has published for the 2026/27 tax year, so the figures you see reflect the position your company is actually filing on rather than a historic set of bands. Change any input and the result recalculates immediately, with no sign-up and nothing sent anywhere.
If you are a director of a UK limited company, use it as a first look before a decision rather than as the decision itself. Works backwards using 2026/27 income tax, dividend tax, corporation tax and employer NI rates, iterating to find the gross figures that net down to your target. Real company positions bring in other income, reliefs, group structures and prior year adjustments that a single page of inputs cannot see, which is why the workings are written out below under contractor, ir35 & umbrella. Read those, then check the numbers against your own accounts, and speak to us if anything looks materially different from what you expected.
Last reviewed 12 September 2026 for the 2026/27 tax year. Reviewed by Waqas Sagar, Member of ICAEW, Fellow of ACCA, Fellow of AAT.
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Result, 2026/27
Day rate required
Gross contract income required
Dividends required (before tax)
Corporation tax on profit
Illustration only, figures are based on the rates you have selected and the information entered. Please check your own position with us before acting.
Estimates for the 2026/27 tax year using published GOV.UK rates. Switch between 2026/27 and 2025/26 above.
How this is calculated
The calculator first works out how much of your target take-home pay is covered by your chosen salary, after income tax and employee National Insurance, using the personal allowance and standard bands for the year. Any shortfall must come from dividends.
Because dividend tax depends on the dividend allowance and the rate that applies once your salary and other dividends use up lower bands, the calculator iterates: it estimates a gross dividend figure, works out the tax, checks whether the net amount matches what you need, and adjusts until it converges.
The same iterative approach is applied to corporation tax, since the small profits rate, marginal relief and main rate mean the relationship between profit and dividends available is not a simple percentage. The gross contract income needed is then the sum of profit, salary, employer's National Insurance and running costs.
Why gross income needs to be much higher than take-home
For a moderate target income, roughly 25 to 40% of gross contract income typically disappears in employer's National Insurance, corporation tax and personal tax by the time it reaches your take-home pay, and the proportion rises as income increases due to higher marginal tax rates.
This is why contractors often underestimate the day rate needed to hit a target lifestyle income, particularly once accountancy fees, pension contributions and unpaid time between contracts are added on top.
Using this alongside a day rate decision
If a client's budget will not stretch to the day rate this calculator shows, you have three levers: reduce your target take-home pay, increase billable days, or accept a lower net income for this particular contract.
Compare the result with the salary vs contracting calculator to see how the same target compares with an equivalent permanent salary.
What this means for your company
Treat the result as a planning figure for the 2026/27 tax year. If it changes what you were about to do, take a director's salary, a dividend, a large asset purchase or a filing decision, check it against your own accounts first. We can review the position with you and confirm the tax treatment before you commit.
Frequently asked questions
Why does the calculator need to iterate rather than just work out a percentage?
Because UK dividend and corporation tax are progressive, with allowances and rate bands, there is no single percentage that converts a take-home target directly into a gross figure. The calculator repeatedly estimates and refines the gross figures until the resulting take-home pay matches your target.
Does this include VAT in the day rate?
No. VAT, where charged, is collected on top of the day rate and paid to HMRC (less input VAT recovered), so it does not affect your personal take-home pay and is excluded from this calculation.
What if I want to draw dividends over more than one tax year?
This calculator assumes a single tax year. Spreading dividends across two tax years can reduce the effective tax rate if it keeps you in a lower band each year, but that requires a year-by-year plan rather than this quick calculator.
Should I include pension contributions in my target income?
This calculator focuses on cash take-home pay. Employer pension contributions from your limited company are a separate, tax-efficient way to build wealth and are not included in the target figure here.
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