Enter your contract rate and see exactly what you take home after employer NI, apprenticeship levy, and umbrella margin. Compare umbrella vs limited company and find the day rate that matches your salary.
Built & maintained by Marcus, freelancer·Figures from HMRC·Last updated June 2026
⚠️ Rates confirmed for 2025/26 and 2026/27: Employer NI remains 15% (secondary threshold £5,000/year). Income tax bands frozen. Employee NI 8% (£12,570–£50,270) / 2% above. Apprenticeship Levy 0.5%. All rates unchanged from April 2025.
15%
Employer NI rate from April 2025
£5,000
Employer NI secondary threshold
0.5%
Apprenticeship Levy on assignment rate
~58%
Typical take-home % of contract rate
£/ day
£/ wk
days
wks
Auto-enrolment pension
Employer 3% + Employee 5% on qualifying earnings (£6,240–£50,270)
⚠️ Estimate only. England/Wales/NI income tax rates applied. Assumes umbrella handles PAYE — no other deductions. Personal allowance taper above £100k modelled. Holiday pay (12.07%) is included within Total Gross Pay — calculated below. Consult your umbrella company for your exact payslip.
Compare your umbrella company take-home (inside IR35, PAYE) against a limited company. Toggle whether the Ltd contract is outside or inside IR35 to see how both scenarios stack up.
£/ day
days
£/ mo
☂ Umbrella Company · Inside IR35
Annual take-home
£—
— / month
Assignment Rate—
Umbrella Margin (est. £20/wk)—
Employer NI (15%)—
Apprenticeship Levy (0.5%)—
Gross Pay—
Income Tax + Employee NI—
Admin / setup cost£0
🏢 Limited Company · Outside IR35
Annual take-home
£—
— / month
Gross contract income—
Director salary (PA)—
Corporation / employer NI—
Post-tax profit / dividends—
Dividend tax—
Accountancy fees—
—more per year with limited company
—
per month
—
% difference
Outside IR35 advantage: A limited company outside IR35 lets you take income as salary + dividends — taxed at lower dividend rates (8.75% basic / 33.75% higher) vs full PAYE inside IR35. The gap at £500/day is typically £8,000–£10,000/year in favour of Ltd outside IR35.
Outside IR35 model: director salary £12,570, no Employment Allowance (sole director), remaining post-tax profit taken as dividends. Marginal relief corp tax 19–25% modelled. Dividend allowance £500. No business expenses modelled. 2025/26 rates.
Find the day rate you need to match a permanent salary via umbrella company, or see a reference table of common day rates and their take-home equivalents.
£/ yr
⭐ Day rate needed
£—
to match your salary via umbrella
Annual contract value
£—
46 wks × 5 days
Effective daily earnings
£—
take-home ÷ working days
Tip: Most contractors add 15–20% on top of the salary-equivalent rate to compensate for no employer pension, sick pay, holiday pay (already in umbrella gross), or job security. At £50k salary equivalent the suggested minimum is —/day.
Day rate reference table — 46 weeks, 5 days, £20/wk margin, pension on
Day Rate
Annual Rate
Est. Take-Home
Monthly
% of Rate
Assumptions: 46 weeks/year, 5 days/week, £20/week umbrella margin, pension auto-enrolled, England/Wales income tax. Results are estimates.
How Umbrella Companies Work
An umbrella company acts as your employer of record. The agency or end client pays the umbrella company your agreed contract rate. The umbrella deducts its employer obligations — National Insurance, pension, and margin — and pays you as an employee through PAYE. You receive payslips, statutory employee rights, and a P60 at year end. You pay no additional tax through Self Assessment.
🏢
Client / Agency
Pays assignment rate to umbrella company on your behalf
☂️
Umbrella Company
Deducts margin, employer NI (15%), apprenticeship levy, employer pension
📄
Your Gross Pay
Total Gross = Basic Pay + Holiday Pay (12.07%). PAYE applied by umbrella
💷
Your Take-Home
Gross minus income tax, employee NI, and employee pension (if enrolled)
Why employer NI comes out of your rate
Unlike a permanent employee — where employer NI is paid on top of your salary by your employer — umbrella company employer NI comes out of your contract rate. The agency agrees a contract rate with the umbrella company, and from that single sum the umbrella must fund all employer obligations. This is why umbrella contractors typically need a 15–20% rate premium over the equivalent permanent salary to achieve the same net income.
Holiday pay: rolled-up vs accrued
You are entitled to 5.6 weeks (28 days) of paid annual leave under the Working Time Regulations 1998. Most umbrella companies pay holiday pay as rolled-up pay — 12.07% of your basic pay is added to every payslip rather than paid out separately when you take leave. This means your gross pay already includes the holiday element. Always check your umbrella's contract to confirm whether holiday pay is rolled up or accrued in a separate pot.
Key Deductions Explained
Every deduction below is taken from your assignment rate before or after PAYE. Understanding each one helps you evaluate umbrella company quotes and spot undercharging margins.
Deduction
Rate
Who pays
Example (£500/day · 230 days)
Umbrella Margin
~£15–£30/week
Umbrella (from your rate)
~£920/yr at £20/wk
Employer NI
15% above £5,000/yr
Umbrella (from your rate)
~£16,400/yr
Apprenticeship Levy
0.5% of assignment rate
Umbrella (from your rate)
~£575/yr
Employer Pension
3% of qualifying earnings (£6,240–£50,270)
Umbrella (from your rate)
~£1,320/yr
Income Tax (PAYE)
20% / 40% / 45%
You (deducted by umbrella)
~£25,800/yr
Employee NI
8% (£12,570–£50,270) + 2% above
You (deducted by umbrella)
~£3,900/yr
Employee Pension
5% of qualifying earnings
You (deducted by umbrella, into pension)
~£2,200/yr
Apprenticeship Levy explained: Employers with annual payroll above £3 million must pay 0.5% to the government's apprenticeship training fund. Umbrella companies — which employ hundreds or thousands of contractors — almost always exceed this threshold and pass the levy cost through to workers as a line-item deduction on the payslip.
Umbrella vs Limited Company — When Each Wins
The right choice depends on your IR35 status, contract length, and appetite for admin. Use the comparison tab above for your specific numbers.
☂ Choose Umbrella when…
✓ Your contract is inside IR35
✓ Contract length is under 3–6 months
✓ You want zero admin — no accounts, no returns
✓ You're new to contracting
✓ You want statutory employment rights (SSP, SMP, AWR)
✓ You want flexibility over pension and expense claims
✓ You plan to work with multiple clients simultaneously
Inside IR35 via Ltd vs Umbrella: When a contract is determined inside IR35, a limited company and an umbrella company deliver almost identical take-home pay — the same PAYE rules apply to both. The main difference is accountancy fees (£80–200/month for Ltd) and admin overhead. For inside IR35 engagements, umbrella is usually the simpler and cheaper route.
Key Dates for Umbrella Contractors
Unlike self-employed sole traders, umbrella contractors do not file Self Assessment tax returns — the umbrella handles all PAYE obligations. These are the dates that matter.
6 April 2025
Employer NI increased to 15%
Secondary threshold fell to £5,000/yr (from £9,100). Reduces umbrella take-home vs pre-April 2025.
6 April (annual)
New tax year begins
Income tax bands, NI thresholds, and pension contribution limits update. Rates unchanged 2025/26 → 2026/27.
31 May (annual)
P60 issued by umbrella
Your umbrella company must provide your P60 by 31 May. Keep for mortgage, rental, and benefits applications.
On leaving
P45 issued within 28 days
Issued when you leave the umbrella. Required when starting a new umbrella or permanent role to avoid emergency tax.
5 April
End of tax year
Your umbrella reconciles all PAYE for the year. Any over/underpayment is corrected via payroll before this date.
No deadline
No Self Assessment needed
Umbrella PAYE contractors do not file Self Assessment unless they have other income sources (rental, investments, etc.).
Expenses: What Umbrella Contractors Can Claim
Umbrella company contractors face much tighter expense rules than self-employed contractors or limited company directors. Since 2016, travel and subsistence claims have been restricted for most umbrella workers under HMRC's Supervision, Direction and Control (SDC) rules.
SDC restriction (most umbrella contractors): If you are subject to the supervision, direction or control of the end client — which applies to most contractors — you cannot claim travel to a regular workplace or subsistence as a tax-deductible expense through the umbrella.
What you can still claim as a PAYE employee through umbrella:
✓ Professional subscriptions (CIPD, BCS, CIMA, RICS — HMRC-approved list)
✓ Personal protective equipment (PPE) if required for the role
✓ Tools and equipment you purchase and own (not provided by client)
✓ Uniform or specialist clothing required by contract
✗ Travel to regular workplace — not claimable under SDC rules
✗ Meals and subsistence at regular workplace — not claimable
✗ Home office costs — not available on PAYE
If you believe you genuinely operate free of SDC, discuss this with your umbrella company before claiming — they bear the liability for incorrect deductions.
Frequently Asked Questions
How does an umbrella company calculator work?
An umbrella company calculator deducts employer costs from your contract rate before calculating PAYE take-home. The deduction order is: (1) umbrella margin (typically £15–30/week), (2) employer NI at 15% on earnings above £5,000/year, (3) apprenticeship levy at 0.5%, and (4) employer pension (3% of qualifying earnings if auto-enrolled). What remains is your gross pay — from which income tax, employee NI (8%/2%), and employee pension (5%) are deducted to give take-home pay.
Why do I pay employer NI as an umbrella contractor?
When you work through an umbrella company, the umbrella is legally your employer. The agency or client pays a single contract rate to the umbrella — from which the umbrella must fund all employer obligations, including National Insurance (15% from April 2025 on earnings above £5,000/year). This is deducted from your rate, not added on top. The result is that your take-home pay is lower than working outside IR35 via a limited company, where salary and dividends are taxed more efficiently.
What is holiday pay and will I actually receive it?
As an umbrella employee you are entitled to 5.6 weeks (28 days) of paid annual leave under the Working Time Regulations 1998. Holiday pay equals 12.07% of your earnings (5.6 weeks ÷ 46.4 working weeks). Most umbrella companies use rolled-up holiday pay — the holiday amount is included in each payslip. This means you are paid it continuously rather than having a separate holiday fund. Confirm with your umbrella whether pay is rolled up or accrued, as this affects how you budget for time off.
What is the apprenticeship levy and why is it deducted?
The Apprenticeship Levy is a 0.5% government charge on employers with annual payroll above £3 million, used to fund apprenticeship training. Umbrella companies, which employ large numbers of contractors, almost always exceed this threshold. The levy is an employer cost, but because your contract rate is the umbrella's only income for your assignment, the levy is passed through to you — appearing on your payslip as an employer-side deduction at approximately 0.5% of your assignment rate.
Is working through an umbrella company better than a limited company inside IR35?
When a contract is inside IR35, umbrella company and limited company take-home are nearly identical — both routes apply full PAYE taxes to the contract income. The key practical differences: a limited company has ongoing accountancy fees of £80–200/month, requires annual accounts and Corporation Tax returns, and carries director responsibilities. For contractors on short-term inside IR35 engagements, umbrella is typically simpler and marginally more profitable. A limited company makes more sense if you also have outside IR35 contracts and want to retain profits flexibly.
What is a typical umbrella company margin?
Typical umbrella company margins range from £15 to £30 per week (£780–£1,560/year). Some companies charge a monthly fixed fee of £50–£100/month instead. The margin covers the umbrella's employer liabilities, payroll processing, insurance, and employment services. Be cautious of umbrella companies advertising very low or zero margins — costs are sometimes recouped through inflated admin charges, delayed holiday pay, or opaque fee structures. Always ask for the full weekly or monthly cost in writing before signing.
What day rate do I need to match my current salary via umbrella?
To match a £40,000 permanent salary via umbrella (46 working weeks, 5 days/week, £20/week margin, pension auto-enrolled), you need approximately £230/day. For £50,000 approximately £305/day, and for £60,000 approximately £385/day. Use the Salary Equivalent tab above for your exact figure. Contractors typically target 15–20% above the salary-equivalent rate to compensate for the lack of employer benefits, sick pay, and career security that a permanent role provides.
Sources & how we calculate
This calculator works out your umbrella take-home from your assignment rate by deducting employer's National Insurance, the Apprenticeship Levy and the umbrella margin, then employee income tax and National Insurance on the resulting salary. It also compares the umbrella route against a limited company. All figures use 2025/26 thresholds and run in your browser.