Outside IR35 (Limited Company) vs Umbrella · Accurate 2026/27 rates
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Compares the three most common director salary strategies for your numbers. The best option is highlighted.
| Salary Strategy | Take-Home | Corp Tax | Dividend Tax |
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What day rate would you need on an Inside IR35 (Umbrella) contract to match your current Outside IR35 take-home?
This free tool estimates the difference in take-home pay between working Outside IR35 through your own limited company and working Inside IR35 (or via an umbrella company). It is built for UK contractors, freelancers and consultants who want a clear side-by-side comparison using current tax rules.
All calculations use published HMRC rates and thresholds for the 2026/27 tax year (6 April 2026 – 5 April 2027). The tool runs entirely in your browser — none of the figures you enter are sent to or stored on any server.
It is an estimation and illustration tool only. It does not determine your IR35 status, does not replace professional advice, and cannot account for every personal circumstance. Always speak to a qualified accountant before making contractual or tax decisions.
Who this is for: limited company directors comparing umbrella quotes; contractors checking the cost of an Inside IR35 role; people modelling day rate, expenses, pension and student loan effects on net pay.
When a contract is assessed as Outside IR35, you can normally operate through your own limited company. You invoice the client or agency, pay yourself a mix of salary and dividends, claim allowable business expenses, and pay Corporation Tax on company profits. That structure is usually more tax-efficient for higher day rates, but you must run the company properly (accounts, Confirmation Statement, payroll for any salary, and so on).
When a contract is Inside IR35 (or you choose an umbrella for convenience), the engagement is treated more like employment. A compliant umbrella company deducts employer National Insurance, income tax and employee National Insurance under PAYE and pays you a net salary. You lose most of the limited-company tax advantages, but you avoid company administration.
The calculator shows the typical financial difference between these two models using the same day rate and working days. The gap is often large, which is why accurate IR35 status determination matters. Status depends on real working practices (control, substitution, mutuality of obligation, and similar factors), not on the numbers in this tool.
Always get the status of each engagement reviewed properly and take advice from a qualified accountant before deciding how to operate.
Outside IR35 (Limited Company)
Assumes you operate through a limited company. A director salary is paid (default £12,570, the personal allowance), allowable business expenses and accountancy fees are deducted, Corporation Tax is applied (with marginal relief where relevant), and the remainder is taken as dividends. Dividend tax and any income tax or National Insurance on the salary are then calculated. Optional personal or company pension contributions can be included.
Inside IR35 (Umbrella)
Models a typical compliant umbrella company. The assignment rate is reduced by the weekly umbrella margin, then treated as employment income. Employer National Insurance, income tax and employee National Insurance are deducted under PAYE. The result is a realistic net salary after those deductions.
Key 2026/27 rates used
Rates can change. This tool is updated for the 2026/27 year based on published figures available at the time of the last update. Always confirm current HMRC rates if you need official certainty.
These examples show the kind of comparison the calculator produces. Your own figures will differ. Use the buttons above the form for quick presets, then adjust expenses, margin and pension to match your situation.
1. Typical contractor – £500/day, 220 days
A common full-year pattern. With standard accountancy fees, modest expenses and a mid-range umbrella margin, the Outside IR35 route usually shows a clearly higher annual take-home than a compliant umbrella. The gap comes mainly from employer NI on the umbrella side and the salary-plus-dividend mix on the limited company side.
2. Lower rate – £350/day, 220 days
At lower day rates the absolute gap narrows, but the percentage difference can still matter over a full year. Expenses and umbrella margin have a larger relative effect, so it is worth testing several margin values if you are comparing umbrella quotes.
3. Higher rate – £650/day, 220 days
Higher rates push more income into higher tax bands. Limited company extraction (salary near the allowance, then dividends) often remains more efficient than PAYE through an umbrella, but Corporation Tax, dividend tax and any student loan repayments all need to be considered together. The salary optimiser section helps explore whether a different director salary changes the result.
None of these examples is advice. They illustrate how the tool behaves so you can interpret your own results more confidently.
IR35 — UK tax rules that decide whether a contractor engagement should be taxed more like employment. “Outside IR35” generally allows limited company treatment; “Inside IR35” is treated more like PAYE employment.
Umbrella company — An employer that puts contractors on its payroll, deducts tax and NI under PAYE, and usually charges a weekly margin. Common when a role is Inside IR35 or when someone does not want to run a limited company.
Day rate — What the client or agency pays for a day of work before your own deductions, taxes and (for umbrella) margin.
Director salary — Pay taken as employment income from your own company. Many contractors set this near the personal allowance (£12,570) and take further profit as dividends.
Dividends — Profit distributed from a limited company to shareholders after Corporation Tax. Taxed differently from salary.
Umbrella margin — The weekly fee a compliant umbrella keeps for running payroll. Often roughly £15–£30 per week in 2026/27.
Take-home — What you actually keep after the modelled taxes, NI, margin and (where relevant) Corporation Tax and dividend tax. This tool’s take-home is an estimate, not a payslip guarantee.
Is this an official HMRC tool?
No. This is an independent free estimator. It is not affiliated with or endorsed by HMRC.
Does it decide my IR35 status?
No. IR35 status depends on the nature of the engagement and working practices. This calculator only estimates the financial difference between common operating models once status is known or assumed.
Why is the umbrella take-home usually lower?
Under an umbrella you are taxed as an employee (PAYE income tax, employee NI, and the cost of employer NI). Outside IR35 via a limited company you can typically extract profit more efficiently through a mix of salary and dividends and claim allowable business expenses.
What umbrella margin should I use?
Most compliant umbrellas charge between about £15 and £30 per week in 2026/27. £20–£28 is a common range. The default of £25 is a realistic mid-point; replace it with the figure from your quote.
Why is director salary defaulted to £12,570?
That matches the standard personal allowance for 2026/27 in many common setups. Taking salary up to the allowance can use the allowance efficiently before dividends. It is not mandatory — use the salary control and salary optimiser to test other levels.
Are Scottish tax rates supported?
The calculator currently uses England, Wales and Northern Ireland income tax bands for consistency. Scottish rates differ. Treat results as approximate if you pay Scottish income tax, and confirm with an accountant.
Can I include a student loan?
Yes. Choose Plan 1, 2, 4, 5 or Postgraduate. The tool applies the relevant 2026/27 thresholds when estimating repayments.
Do expenses reduce umbrella take-home the same way?
Allowable expenses work differently under PAYE/umbrella than inside a limited company. This model focuses on typical company-side expenses for the Outside IR35 column. Do not assume every expense you type applies equally to both routes.
Is my data stored?
No. All calculations run locally in your browser. The numbers you enter never leave your device.
Can I rely on these numbers for decisions?
No. The figures are estimates based on standard assumptions. Your actual position depends on many factors. Always take advice from a qualified accountant or tax adviser before making financial or contractual decisions.
How is this different from a payslip or accountant forecast?
A payslip reflects one payroll run under one employer’s exact rules. An accountant can model your full personal position (other income, claims, timing). This site is a fast, transparent comparison for education and planning — not a substitute for either.
Will you add more features?
Possible future improvements include more location options and finer umbrella cost models. Use the interest button on the page if you want to be notified about a pro version.
In-depth articles to read alongside the calculator: