Umbrella or your own limited company?
Same day rate, both routes, every deduction shown — and why your umbrella payslip looks so small.
This comparison only applies outside IR35
The assignment rate the agency quotes you
220 is typical once holidays and gaps are taken out
Usually £15–£30. Ask for it in writing before you sign
Accountant, insurance, software — limited company only
Limited company keeps more
£4,033.53
more in your pocket per year · £336.13 per month
Umbrella take-home
£59,996
£4,999.62 per month
Limited take-home
£64,029
£5,335.75 per month
Contract value
£99,000
£450 × 220 days
Why your umbrella payslip looks smaller than the day rate
| Assignment value | £99,000.00 |
|---|---|
| Umbrella margin | −£1,300.00 |
| Employer’s National Insurance | −£12,035.71 |
| Apprenticeship levy | −£426.19 |
| Gross pay on your payslip | £85,238.10 |
| Income Tax | −£21,527.24 |
| Your National Insurance | −£3,715.36 |
| Take-home pay | £59,995.50 |
| Company income | £99,000.00 |
|---|---|
| Company costs | −£1,500.00 |
| Director’s salarySet at the National Insurance threshold | −£12,570.00 |
| Employer’s National Insurance | −£1,135.50 |
| Profit before tax | £83,794.50 |
| Corporation Tax | −£18,455.54 |
| Dividends available | £65,338.96 |
| Dividend tax | −£13,879.93 |
| Take-home pay | £64,029.03 |
Umbrella: you keep
60.6%
of the contract value
Limited: you keep
64.7%
of the contract value
Difference
£4,034
per year
What this model assumes
Figures for the 2026/27 UK tax year. Rates last checked against HMRC on 2026-08-28. See every source.
How to compare the two routes
This compares what actually reaches your bank account on the same contract, taken two ways. It only makes sense for contracts outside IR35: inside IR35 the fee has to run through PAYE regardless, so a limited company adds accountancy fees and paperwork without adding any tax advantage. The comparison also explains the thing that shocks almost every new contractor — the assignment rate an agency quotes is the cost of the whole employment package, not your gross pay. The umbrella takes its margin, employer’s National Insurance and the apprenticeship levy out of it first, and only what is left appears on your payslip as gross pay.
- 1Enter the day rate the agency has quoted you, and how many days a year you expect to bill.
- 2Enter the umbrella’s weekly margin — ask for it in writing before you sign anything.
- 3Enter what a limited company would cost you a year in accountancy, insurance and software.
- 4Compare the two breakdowns side by side, and check the assumptions note before acting on the gap.
FAQ
Why is my umbrella gross pay so much lower than the day rate?
Because the day rate is what the assignment costs, not what you are paid. Employer’s National Insurance, the apprenticeship levy and the umbrella’s own margin all come out of that figure before your gross pay is set — and then your Income Tax and National Insurance come out of what is left. Nothing has been taken twice; the quoted rate simply never was your salary.
Does this apply if my contract is inside IR35?
No, and using it anyway will mislead you. Inside IR35 the fee is taxed through PAYE whichever structure you use, so the limited company route loses its advantage entirely and only adds cost. Check the status determination statement from your client before deciding.
Why does the calculator assume no Employment Allowance?
A company with a single director and no other employee paid above the secondary threshold cannot claim it — which describes almost every contractor limited company. Assuming otherwise would flatter the limited company figure by several thousand pounds a year.
What changed for umbrella companies in April 2026?
Responsibility for operating PAYE on umbrella workers moved to the recruitment agency, or to the end client where there is no agency. It does not change the arithmetic on this page, but it changes who carries the risk if the umbrella fails to pay the tax over — which had been the source of most of the harm in this market.