Contractor Calculator
PAYE vs Umbrella vs Ltd — Which Pays More? UK 2026
Tax Year
2026/27
Corp Tax
19%
Enter your annual contract value and compare take-home pay across PAYE employment, umbrella company and limited company contracting. Results update instantly using 2026/27 HMRC rates, including income tax, National Insurance, corporation tax and dividend tax, so you can see exactly which structure puts the most money in your pocket.
Contract Details
Annual Take-Home Pay Comparison
PAYE
Best£0
Umbrella
Best£0
Ltd Co.
Best£0
Umbrella vs PAYE
£0
Ltd vs PAYE
£0
How the PAYE vs umbrella vs Ltd calculator works
Enter your annual contract value — the total amount your client pays for your services over a year. The calculator runs each of the three contractor structures through 2026/27 HMRC rates and shows your annual take-home pay for each option side by side.
PAYE: Your contract value is treated as a straight gross salary. Income tax and employee National Insurance are deducted using the standard bands: 20% basic rate (£12,571–£50,270), 40% higher rate (£50,271–£125,140), and 45% additional rate above that. Employee NI runs at 8% up to £50,270 and 2% above.
Umbrella company: The umbrella charges a weekly margin (typically £15–£50). Multiply by 52 to get the annual cost. The remainder is your taxable gross, on which income tax and employee NI are calculated in the same way as PAYE.
Limited company: You draw an optimal salary of £12,570 (within the personal allowance, minimising NI). Employer NI is paid on salary above the £9,100 secondary threshold. The remaining profit is subject to 19% corporation tax; the after-tax profit is available as dividends. The first £500 of dividends is tax-free; the rest is taxed at 8.75% (basic rate) or 33.75% (higher rate). Any allowable business expenses further reduce the company profit and therefore corporation tax.
What you need to know about contractor structures
The limited company route usually produces the highest take-home pay, but it comes with important caveats:
- IR35 risk: If HMRC determines your contract falls inside IR35, your limited company income is taxed as employment income — removing most of the tax benefit. Since April 2021, medium and large private sector clients set your IR35 status, not you.
- Admin overhead: Running a limited company requires annual accounts, a corporation tax return, payroll and dividend paperwork. Accountancy fees typically run £1,000–£2,000 per year, which reduces your effective saving.
- No employee benefits: Limited company directors are not entitled to statutory sick pay, redundancy pay or automatic pension enrolment. Umbrella workers receive these as PAYE employees.
- Umbrella risks: Not all umbrella companies are HMRC-compliant. Avoid schemes promising unusually high take-home pay through loans or non-taxable payments — these are tax avoidance arrangements that HMRC actively pursues.
For most outside-IR35 contractors with a contract value above £50,000, the limited company advantage over PAYE is several thousand pounds per year. For lower-rate taxpayers or those inside IR35, the administrative cost may outweigh the saving.
For the current dividend tax rates and allowances, see the official HMRC guidance on tax on dividends.
Frequently asked questions
Which pays more — PAYE, umbrella or limited company?
A limited company typically produces the highest take-home pay for contractors earning above £30,000 a year. The tax-efficient combination of a small salary plus dividends reduces both income tax and National Insurance compared to PAYE or umbrella. The exact saving depends on your contract value, allowable expenses and whether you fall inside or outside IR35.
How does an umbrella company affect my take-home pay?
An umbrella company employs you as a PAYE worker and charges a weekly or monthly margin — typically £15 to £50 per week. Your take-home pay is your contract value minus the umbrella margin, minus income tax and employee National Insurance. You pay slightly less than direct PAYE because the umbrella margin reduces your taxable gross, but you lose the tax efficiency of a limited company.
What is IR35 and how does it affect limited company contractors?
IR35 is HMRC anti-avoidance legislation targeting contractors who operate like employees. If your contract falls inside IR35, your limited company income is taxed at PAYE rates, removing most of the tax benefit. Since April 2021, medium and large private sector clients determine IR35 status. Outside-IR35 contracts retain full limited company tax efficiency.
Are limited company expenses tax deductible?
Allowable business expenses reduce your company's taxable profit, cutting your corporation tax bill. Common deductions include professional subscriptions, equipment, software, home office costs and mileage. Personal expenses are not deductible. Only claim costs that are wholly and exclusively for business purposes as HMRC may challenge personal items claimed as expenses.
What are the main disadvantages of a limited company?
Running a limited company involves filing annual accounts with Companies House, submitting a corporation tax return, running payroll and managing dividend paperwork. Accountancy fees typically run £1,000 to £2,000 per year. You also lose access to employee benefits like statutory sick pay and automatic pension enrolment that umbrella and PAYE workers receive.