Umbrella vs Ltd Company Calculator — Side-by-Side Take-Home Pay (2026/27)
Compare your take-home pay through an umbrella company versus your own limited company. Enter your contract rate, working pattern, pension, and deductions below to see the real difference. Updated for the 2026/27 tax year with the latest HMRC rates, including the 15% employer NI rate and Scottish income tax bands.
How to Use This Calculator
Comparing an umbrella company against your own limited company takes just a few steps. Adjust any input and both columns update instantly.
Enter Your Contract Rate
Set your day rate, days per week, and weeks per year to match your contract. The gross annual income updates automatically. Most contractors work 46 weeks per year after accounting for holidays and bank holidays.
Set Your Deductions
Adjust pension contribution (as a percentage of gross income), select your student loan plan, and choose your location. Scotland uses five different income tax bands which can significantly affect take-home pay.
Compare Take-Home Pay Instantly
View the umbrella company and limited company results side by side. The breakdown panels show exactly where every pound goes — from employer NI and apprenticeship levy to corporation tax and dividend tax.
Key Differences: Umbrella vs Limited Company
Understanding the structural differences helps you make an informed choice. Here are the main factors that affect your take-home pay and overall contractor experience.
- You are employed by the umbrella, which handles PAYE payroll, tax, and NI deductions automatically
- Weekly margin of £20–£30 deducted from gross income before tax
- Apprenticeship levy (0.5%) is commonly passed through to you as a line-item cost
- No corporation tax or dividend tax — you are taxed as an employee via PAYE
- Limited expense claims since 2016 (SDC rules restrict travel and subsistence)
- No annual accounts, no accountant fees, no Companies House filings
- Quick to set up — you can start within 24 hours
- Your own business entity — you control salary vs dividend split to minimise tax
- No umbrella margin or apprenticeship levy pass-through costs
- Employer NI (15%) is avoided on dividend drawings, saving thousands per year
- Corporation tax at 19–25% on profits, then dividend tax at 8.75–39.35% on drawings
- Wider range of allowable business expenses through the company
- Annual accounts, CT600 filing, and accountant fees required (typically £100–£200/month)
- Setup takes a few days; ongoing administrative responsibility
Worked Example
A senior IT contractor earning £500/day, 5 days per week, 46 weeks per year, comparing umbrella company vs limited company take-home. Pension set to 5% of gross income.
| Item | Umbrella Company | Limited Company (Outside IR35) |
|---|---|---|
| Gross annual income | £115,000 | £115,000 |
| Employer NI (15%) | −£15,578 | — |
| Apprenticeship levy (0.5%) | −£575 | — |
| Umbrella margin (£25/week) | −£1,150 | — |
| Pension contribution (5%) | −£5,750 | −£5,750 |
| Income tax | −£26,783 | — |
| Employee NI (8%/2%) | −£4,082 | — |
| Corporation tax (19–25%) | — | −£23,179 |
| Dividend tax (8.75/33.75/39.35%) | — | −£22,299 |
| Net annual take-home | £61,082 | £63,772 |
Assumptions and Limitations
This calculator provides illustrative estimates based on published HMRC rates. Every contracting situation is unique.
Tax Rates Assumed
- Personal allowance: £12,570 (2026/27)
- Basic rate 20%: £12,571–£50,270
- Higher rate 40%: £50,271–£125,140
- Additional rate 45%: over £125,140
- Employer NI: 15% above £5,000/year
- Employee NI: 8% / 2% thresholds
- Corporation tax: 19% (profits under £50k), marginal relief to 25%
- Dividend tax: 8.75% / 33.75% / 39.35% above £500 allowance
Key Limitations
- No other employment income or benefits in kind
- Standard personal allowance (no high-income taper applied)
- Limited company: all post-tax profit drawn as dividends (no salary optimisation)
- Umbrella margin fixed at £25/week (actual margins vary £20–£30)
- No VAT, R&D credits, capital allowances, or CIS scheme considerations
- No marriage allowance or spouse salary/dividend splitting
- Student loan thresholds are annualised from weekly/monthly equivalents
Employer NI & Apprenticeship Levy
- Employer NI: 15% on earnings above £5,000 (increased from 13.8% in 2024 Budget)
- Apprenticeship levy: 0.5% of total pay bill (passed through by most umbrellas)
- Inside IR35 and umbrella: employer NI is deducted from the contract value before you receive pay
- Outside IR35 (Ltd): no employer NI on dividend drawings, only on salary (typically minimal)
Student Loan Repayments
- Plan 1: 9% above £24,375/year
- Plan 2: 9% above £27,295/year
- Plan 4: 9% above £31,395/year
- Plan 5: 9% above £25,000/year
- Employer NI and apprenticeship levy are deducted before student loan calculation
Umbrella vs Ltd Company FAQ
Common questions about choosing between an umbrella company and your own limited company for UK contracting.
An umbrella company employs you on behalf of the end client, handling PAYE payroll, tax, NI, and pension deductions for a weekly margin. A limited company is your own business entity, giving you control over salary vs dividends and generally higher take-home pay. The main trade-off is higher take-home with a Ltd company versus the convenience and lower admin burden of an umbrella.
Most umbrella companies charge £20–£30 per week for their payroll and compliance services. This margin is deducted from your gross income before tax calculations. Some providers offer same-day payment, contractor account management, and IR35 support as part of their service. Always check the margin breakdown — some umbrellas also pass through the apprenticeship levy (0.5%) and employer NI as separate line items.
A limited company (outside IR35) almost always gives you higher take-home pay because you can optimise salary vs dividends, pay lower employer NI (none via dividends), and avoid the umbrella margin. The difference is typically 10–20% depending on your day rate, pension contributions, and whether you have student loan repayments. Use this calculator to see the exact difference for your situation.
Since 2016, most umbrella company contractors cannot claim travel and subsistence expenses due to the supervision, direction, or control (SDC) tests. Your umbrella will typically process only pension contributions and the £12,570 personal allowance as deductions. Limited company contractors can claim a wider range of business expenses through their company, including equipment, training, and professional subscriptions.
The apprenticeship levy is 0.5% of your total pay bill. While it technically only applies when the annual pay bill exceeds £3 million, many umbrella companies pass through an equivalent charge as a standard line item in their margin breakdown. This levy does not apply to limited company contractors operating outside IR35, giving the Ltd route a small but consistent cost advantage over the course of a year.
For contracts under 3–6 months, the setup cost, accountancy fees, and admin overhead of a limited company may outweigh the tax savings. Umbrella companies are often more practical for short-term or rolling contracts. Use this calculator to compare the actual take-home difference for your specific rate and duration, then factor in accountant fees (£100–£200/month) to see the net benefit.
Pension contributions reduce your taxable income in both scenarios, narrowing the take-home gap. For a Ltd company, pension is a company expense that reduces corporation tax. For an umbrella, it is deducted from your gross income before PAYE. Higher pension contributions make umbrella and Ltd take-home closer, but the Ltd route typically still comes out ahead due to the dividend tax advantage over income tax and NI.