Umbrella vs. Limited Company Take-Home Calculator
Compare UK contractor take-home pay between an umbrella company (PAYE, Employer's NI, Apprenticeship Levy, margin) and a limited company (Corporation Tax, salary/dividend split).
- Umbrella — Annual Take-Home£61,195.82
- Limited Company — Annual Take-Home£67,663.11
On these numbers, Limited Company leaves you with £6,467.29 more in your pocket each year — but see the IR35 note above before treating that gap as guaranteed.
- Limited Company — Annual Take-Home£67,663.11
- Difference£6,467.29
- Umbrella — Employer's NI + Levy + Margin Deducted£16,192.38
- Ltd — Corporation Tax + Employer's NI£20,863.04
This is an illustrative estimate, not tax advice — real umbrella payslips and accountant fee structures vary.
Outside-IR35 comparison shown — this is where the limited company route's tax efficiency genuinely applies.
We don't determine your IR35 status — see the IR35 Factors Checklist for the main factors, and get a professional assessment for a real engagement.
About the Umbrella vs. Limited Company Take-Home Calculator
This is the calculator contractors reach for right before signing an umbrella company registration or setting up a limited company — the decision that shapes every payslip afterward. The two routes tax the same day rate completely differently: an umbrella company runs you through PAYE with Employer's National Insurance and a weekly margin taken off the top, while a limited company lets you take a small salary and the rest as dividends, taxed under a different set of rules entirely.
The gap between the two can be a few thousand pounds a year or barely anything at all, depending heavily on your rate, how many weeks you actually work, and — critically — your IR35 status on the specific engagement. This tool runs both routes side by side on your actual numbers instead of a generic rule of thumb like 'limited company is always better'.
Contract rates and take-home pay are sensitive numbers you're often comparing before you've committed to either route. Everything you enter runs in your browser only — nothing is saved or sent anywhere, so you can model both options honestly before telling an umbrella provider or an accountant anything.
How it’s calculated
Umbrella route: your day/hour rate is first reduced by the umbrella's weekly margin and the 0.5% Apprenticeship Levy, then Employer's National Insurance is deducted from what's left (the umbrella technically pays this as your employer, but it comes out of your assignment rate either way). What remains is your gross taxable pay, which then goes through ordinary Income Tax bands and employee National Insurance — the same as any employee.
Limited company route: your company pays a modest director's salary (commonly set near the Income Tax personal allowance, since salary attracts Employer's NI once it clears a low secondary threshold), deducts allowable expenses and Employer's NI on that salary, then pays Corporation Tax on whatever profit is left. What survives Corporation Tax can be distributed as dividends, which are taxed separately from salary — at lower rates, but stacked on top of your salary income to work out which dividend tax band applies.
Corporation Tax itself isn't a single flat rate: profits up to £50,000 pay the small-profits rate, profits above £250,000 pay the main rate, and profits in between get marginal relief that tapers smoothly from one to the other, so the effective rate rises gradually through that middle band rather than jumping at a cliff-edge.
IR35 status changes everything: this comparison assumes a genuinely outside-IR35 limited company can fully use the salary/dividend split. If an engagement is actually inside IR35, the fee-payer must deduct tax and NI at source similarly to employment, which erases most of the limited company's tax advantage in practice — the raw numbers shown here would then overstate what a real inside-IR35 limited company contract actually nets.
Frequently asked questions
Is a limited company always more tax-efficient than an umbrella company?
Usually only if the engagement is genuinely outside IR35 — that's what lets you take most of your income as dividends taxed at lower rates than salary. Inside IR35, tax is deducted at source in a way that closely mirrors employment, so the limited company advantage mostly disappears.
Why does the umbrella company deduct Employer's National Insurance from my pay?
Because the umbrella company is legally your employer and Employer's NI is its cost to bear — but since umbrella companies aren't otherwise profiting from your assignment rate, that cost is effectively funded from the rate the client is paying for your work, so it reduces what reaches you.
What salary should I pay myself through a limited company?
Many contractors set it near the Income Tax personal allowance — high enough to build National Insurance contribution record, but low enough to minimise Employer's and employee NI, with the rest of their income taken as dividends. This is a general pattern, not personal advice — an accountant can confirm what fits your situation.
How is dividend tax different from Income Tax on salary?
Dividends have their own separate rate bands, generally lower than equivalent Income Tax rates, but they still stack on top of your other income to determine which dividend band applies — plus dividends carry no National Insurance at all, unlike salary.
What does 'inside IR35' actually mean for my take-home pay?
It means HMRC (or the fee-payer, under current off-payroll working rules) treats the engagement as employment for tax purposes, so tax and NI are deducted from your limited company's income much as they would be under PAYE, regardless of how you structure salary and dividends afterward.
Does this calculator tell me if I'm inside or outside IR35?
No — that determination depends on the specific working practices of the engagement, not on the umbrella-vs-limited-company comparison itself. Use the IR35 Factors Checklist to walk through the main factors, and get a professional assessment for a real contract.
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