Most UK contractors are undercharging.
Find out by how much.

Outside IR35 — extraction strategy

The calculator assumes the optimal Ltd Co approach: a director salary equal to the personal allowance (£12,570), with all remaining profit taken as dividends. At this salary level, income tax is £0 and employee NI is £0 — both sit below their respective thresholds. The company pays employer NI (15% above £5,000), which is deductible from taxable profit before corporation tax.

Fixed business costs

A standard annual cost base of £3,500 is assumed: accountancy (£1,800), professional indemnity insurance (£700), public liability insurance (£200), and equipment/software (£800). All are corporation tax-deductible. Your actual costs may differ.

Employer NI

Employer NI is 15% on earnings above the £5,000 secondary threshold. On a £12,570 director salary, this costs the company £1,135.50/yr. It's a company expense, not a personal deduction, which is why it appears in the Company section of the breakdown.

Corporation tax

The small profits rate (19%) applies to annual taxable profits up to £50,000. The main rate (25%) applies above £250,000. Between those thresholds, marginal relief applies. This calculator assumes no associated companies — if you have any, the thresholds are divided between them, which could increase your effective CT rate.

Dividend tax

The 2026/27 annual dividend allowance is £500. Dividends above that are taxed at 10.75% (basic rate band) and 35.75% (higher rate band), both up by 2 percentage points from 2025/26. Salary and dividends are stacked in the correct order when calculating which tax band applies.

Inside IR35 — umbrella

Umbrella company margin is assumed at £2,600/year (~£50/week). Professional indemnity insurance (£700/yr) remains the contractor's cost. Employer NI (15% above £5,000) is deducted by the umbrella before gross pay is calculated. Standard income tax and employee NI then apply to that gross employment income.

VAT

All revenue figures are ex-VAT. Most contractors above the registration threshold (£90,000) are VAT-registered; VAT collected passes through to HMRC and doesn't affect take-home under standard accounting.

Pension

Pension contributions are not included in the take-home figure — they're shown separately as the pension gap note below the breakdown. If you want to match the employer contributions you'd receive in employment (typically 5–8%), add the suggested amount to your required rate.