Contractor vs PAYE
Compare take-home pay across PAYE employment, umbrella company and limited company structures. See the real difference side by side.
Smart Tips
Ltd company saves ~£5,240/year vs umbrella
Outside IR35, a limited company structure is significantly more tax-efficient due to the combination of low salary, corporation tax, and dividend tax rates. This only applies if your engagement is genuinely outside IR35.
HMRC: Understanding off-payroll working (IR35) (opens in new tab)£12,091 of your contract goes to employer's NI
Under an umbrella company, employer's NI (15% above £5,000) is deducted from your contract rate before you're paid. This is the biggest hidden cost of umbrella arrangements.
HMRC: National Insurance rates (opens in new tab)Umbrella take-home is lower than equivalent PAYE
As a PAYE employee, employer's NI is paid by the employer on top of your salary. Through an umbrella, it comes out of your contract rate — reducing your take-home by ~£7,767/year.
HMRC: National Insurance rates (opens in new tab)IR35 status determines which structure applies
If HMRC considers you inside IR35, you must be taxed like a PAYE employee (umbrella or deemed employment). The limited company column only applies if you're genuinely outside IR35. Getting this wrong can lead to significant tax liabilities.
HMRC: Understanding off-payroll working (IR35) (opens in new tab)Ltd companies can claim business expenses
This calculation doesn't include allowable business expenses (travel, equipment, insurance, training). These reduce taxable profit and increase take-home pay further.
HMRC: Business expenses (opens in new tab)