Umbrella vs Limited Company Calculator 2026/27
Enter your annual contract income to compare both routes: umbrella (employment with employer NI and margin deducted) versus a limited company paying salary plus dividends.
How it works
UMBRELLA: you become the umbrella’s employee. From your assignment income, the umbrella deducts its margin and the employer costs — 15% employer National Insurance above £5,000 — before your gross salary is set; you then pay normal income tax and employee NI on that salary through PAYE.
LIMITED (outside IR35): the company earns the revenue, pays you a small salary (typically £12,570 — attracting £1,135.50 employer NI, since single-director companies cannot claim the Employment Allowance), pays 19–25% Corporation Tax on the remaining profit, and distributes the rest as dividends taxed at 10.75%/35.75%/39.35%.
The comparison assumes you are OUTSIDE IR35 for the limited route — inside IR35, the limited company loses its advantage because the fee-payer deducts PAYE anyway. Accountancy costs, expenses, VAT flat-rate gains and pension contributions shift the result further; the calculator lets you add company expenses to see their effect.
FAQ
Which pays more — umbrella or limited company?
Outside IR35, a limited company usually nets meaningfully more: on £80,000 of contract income the gap is typically several thousand pounds a year, because Corporation Tax plus dividend tax on the profit route totals less than the employer NI plus full PAYE of the umbrella route. Inside IR35, or on short contracts, umbrella often wins once you price in accountancy fees (£1,000–1,500/year), admin and insurance.
What changed for umbrella companies in April 2026?
From 6 April 2026, responsibility for operating PAYE on umbrella workers moved from the umbrella to the recruitment agency that contracts with the end client (or the end client itself if there is no agency). The change targets tax-skimming umbrella schemes. Your net pay arithmetic is unchanged if your umbrella was compliant — but expect agencies to be far stricter about which umbrellas they will work with.
Why does the calculator pay a £12,570 salary in the limited route?
It is the sweet spot for most single-director companies: at £12,570 the salary is covered by the personal allowance (no income tax), sits at the employee NI threshold (no employee NI), qualifies as a full state pension year, and is deductible against Corporation Tax. The company does pay £1,135.50 employer NI on it — still worth it, because the salary saves at least 19% CT (£2,388) on the way through.
What costs does this comparison leave out?
Accountancy fees (typically £1,000–1,500/year for a contractor company), business insurances, the umbrella margin beyond what you enter, VAT effects, student loan repayments and pension contributions. Pensions deserve special mention: employer contributions from a limited company are extremely tax-efficient and can beat both routes shown here — factor them in before deciding.