Umbrella vs limited company on £1000 a day
| Inside IR35 (umbrella) | Outside IR35 (Ltd company) | |
|---|---|---|
| Gross contract income | £230,000 | £230,000 |
| Employer NI and levy | −£30,216 | −£1,136 |
| Business expenses | — | −£2,000 |
| Corporation tax | — | −£51,278 |
| Income tax | −£73,592 | −£0 |
| Employee NI | −£6,006 | — |
| Dividend tax | — | −£50,616 |
| Take-home per year | £120,186 | £124,971 |
| Per month | £10,015 | £10,414 |
| Per week | £2,311 | £2,403 |
| Share of gross kept | 52.3% | 54.3% |
Inside IR35 your salary of £199,784 is over £100,000, so the personal allowance is withdrawn at £1 for every £2 above it. Between £100,000 and £125,140 that works out as a 60% marginal rate, which is why pension contributions are worth a close look at this rate.
Outside IR35 your company profit of £214,295 sits in the marginal relief band, so corporation tax works out between 19% and 25% (£51,278 in total).
These figures assume 5 days a week for 46 weeks, no pension contributions, umbrella margin not deducted, and for the Ltd company a £12,570 salary with the rest taken as dividends and £2,000 of expenses. Change any of them in the calculator below.
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AssumptionsOutside IR35: Optimal Ltd Co structure, salary set to personal allowance (£12,570). All remaining profit taken as dividends.
Inside IR35 (umbrella)
£120,186
£10,015 per month
Tax burden: 47.7%
Gross income£230,000
Employer NI & levy−£30,216
Income tax−£73,592
Employee NI−£6,006
Take home£120,186
Outside IR35 (Ltd Co)· keeps more
£124,971
£10,414 per month
Tax burden: 45.7%
Gross revenue£230,000
Employer NI−£1,136
Expenses−£2,000
Corporation tax−£51,278
Dividend tax−£50,616
Take home£124,971
Annual gross
£230,000
Daily rate
£1,000
Working days/yr
230
Estimates only. Inside IR35 assumes an umbrella company deducts employer NI and the apprenticeship levy, before its own margin. Outside assumes a £12,570 Ltd Co salary. Individual circumstances vary — consult a contractor accountant for personalised advice.