Umbrella vs limited company on £550 a day
| Inside IR35 (umbrella) | Outside IR35 (Ltd company) | |
|---|---|---|
| Gross contract income | £126,500 | £126,500 |
| Employer NI and levy | −£16,327 | −£1,136 |
| Business expenses | — | −£2,000 |
| Corporation tax | — | −£23,072 |
| Income tax | −£32,518 | −£0 |
| Employee NI | −£4,214 | — |
| Dividend tax | — | −£21,882 |
| Take-home per year | £73,441 | £78,411 |
| Per month | £6,120 | £6,534 |
| Per week | £1,412 | £1,508 |
| Share of gross kept | 58.1% | 62.0% |
Inside IR35 your salary of £110,173 is over £100,000, so the personal allowance is withdrawn at £1 for every £2 above it.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 £110,795 sits in the marginal relief band, so corporation tax works out between 19% and 25% (£23,072 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)
£73,441
£6,120 per month
Tax burden: 41.9%
Gross income£126,500
Employer NI & levy−£16,327
Income tax−£32,518
Employee NI−£4,214
Take home£73,441
Outside IR35 (Ltd Co)· keeps more
£78,411
£6,534 per month
Tax burden: 38.0%
Gross revenue£126,500
Employer NI−£1,136
Expenses−£2,000
Corporation tax−£23,072
Dividend tax−£21,882
Take home£78,411
Annual gross
£126,500
Daily rate
£550
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.