How we work out your numbers
Everything the calculator does is on this page. If you want to check a figure by hand, the worked examples below show each step at £450 a day for 220 days, which is £99,000 a year. Each line is rounded to the pound, so the totals can be £1 out.
The 2026/27 figures we use
These come straight from the file the calculator runs on, so they can’t fall out of step with it.
| Rate or threshold | 2026/27 | Source |
|---|---|---|
| Personal allowance (tax-free income) | £12,570, reduced by £1 for every £2 over £100,000 | GOV.UK |
| Income tax | 20% on the next £37,700, 40% up to £125,140, 45% above | GOV.UK |
| Dividend allowance | £500 | GOV.UK |
| Dividend tax | 10.75% basic rate, 35.75% higher rate, 39.35% additional rate | GOV.UK |
| Employee’s National Insurance | 8% between £12,570 and £50,270, 2% above | GOV.UK |
| Employer’s National Insurance | 15% above £5,000 | GOV.UK |
| State Pension qualifying salary (lower earnings limit) | £6,708 | GOV.UK |
| Corporation tax | 19% on profits up to £50,000, 25% above £250,000, with marginal relief between | GOV.UK |
| Apprenticeship Levy (umbrellas and agencies) | 0.5% of pay | GOV.UK |
| VAT registration threshold | £90,000 turnover a year | GOV.UK |
| Pension annual allowance | £60,000 | GOV.UK |
Outside IR35: your own limited company
Your company invoices the client, pays you a small salary, pays its costs and corporation tax, then pays you the rest as dividends. You pay dividend tax on those personally.
| Step | Amount |
|---|---|
| Company income (£450 × 220 days) | £99,000 |
| Your salary | −£12,570 |
| Employer’s NI on your salary (15% above £5,000) | −£1,136 |
| Company running costs | −£1,500 |
| Profit | £83,795 |
| Corporation tax (25%, less marginal relief) | −£18,456 |
| Paid to you as dividends | £65,339 |
| Your dividend tax | −£13,880 |
| You keep (salary plus dividends after tax) | £64,029 |
Your salary uses your personal allowance, so there’s no income tax or employee’s NI on it. We assume no other income, no Employment Allowance (single-director companies can’t claim it) and that you take all the profit out each year.
Umbrella company
The umbrella is your employer. Out of the £99,000 it takes its fee, then its own employer’s NI and the Apprenticeship Levy. The rest is your gross salary, taxed through PAYE.
| Step | Amount |
|---|---|
| Paid to the umbrella | £99,000 |
| Umbrella fee (£20 a week, 44 weeks) | −£880 |
| Employer’s NI | −£12,090 |
| Apprenticeship Levy (0.5%) | −£428 |
| Your gross salary | £85,602 |
| Income tax | −£21,673 |
| Employee’s NI | −£3,723 |
| You keep | £60,206 |
Some umbrellas don’t pass the Apprenticeship Levy on to you. Untick it in the calculator if yours doesn’t. Holiday pay is part of the rate here, not on top of it.
Inside IR35 with your own company
The agency treats your invoice like a salary. It pays employer’s NI and the levy out of the rate, deducts income tax and employee’s NI, and pays the rest to your company. Your company still has its running costs, and with nothing left to tax, it pays them out of what you’d otherwise keep.
| Step | Amount |
|---|---|
| The agency’s budget (£450 × 220 days) | £99,000 |
| Employer’s NI and Apprenticeship Levy | −£12,636 |
| Your deemed salary | £86,364 |
| Income tax and employee’s NI | −£25,715 |
| Company running costs | −£1,500 |
| You keep | £59,148 |
The law says the agency can’t take its own employer’s NI out of your pay, but most simply offer a lower rate to cover it. That’s why we treat the rate as the agency’s total budget. If your agency pays these costs on top of the rate, tick the box in the calculator and you’ll keep about £7,300 more.
The days you work
There are 260 weekdays in a year, less 8 bank holidays (England and Wales), which leaves 252 you could bill. From those we take your holiday and an allowance for sickness and gaps between contracts. The defaults are 25 days’ holiday and 7 days of gaps, giving 220. Scotland has 9 bank holidays and Northern Ireland 10, so knock off a day or two if that’s you.
Comparing with a permanent job
We compare a whole year of contracting with a whole year in the job. On the contract side that’s everything you keep plus any pension your company pays in. On the job side it’s your take-home pay plus the employer’s pension, any bonus and the value of other benefits like health insurance.
We then find the salary that gives the same total. At £450 a day it’s £84,876 outside IR35.
Many calculators compare day for day instead: they assume you’d bill the same 227 days a permanent employee works. That gives £87,237 for the same contract. It looks better, but it quietly assumes you never have a gap between contracts and are paid for every holiday. We’d rather show you the number you’ll actually live on.
What we leave out
The calculator covers the common case, and these are the things it doesn’t model. Some are worth a few pounds; a student loan can be worth thousands a year, so check the ones that apply to you.
- Student loan and postgraduate loan repayments
- Scottish income tax bands (we use the rates for England, Wales and Northern Ireland)
- Tax on benefits in kind such as health insurance
- Other income, such as rent or a partner’s salary through your company
- Whether your contract really is outside IR35. That’s a judgement on the contract and how you work, and we take your word for it.
When we update
We update the figures every April for the new tax year, and whenever the government changes a rate mid-year. Every change is checked against GOV.UK and against the worked examples on this page before it goes live. Last checked: 11 November 2026.