Umbrella vs limited company on £850 a day
| Inside IR35 (umbrella) | Outside IR35 (Ltd company) | |
|---|---|---|
| Gross contract income | £195,500 | £195,500 |
| Employer NI and levy | −£25,587 | −£1,136 |
| Business expenses | — | −£2,000 |
| Corporation tax | — | −£41,162 |
| Income tax | −£60,150 | −£0 |
| Employee NI | −£5,409 | — |
| Dividend tax | — | −£41,021 |
| Take-home per year | £104,355 | £110,182 |
| Per month | £8,696 | £9,182 |
| Per week | £2,007 | £2,119 |
| Share of gross kept | 53.4% | 56.4% |
Inside IR35 your salary of £169,913 is over £100,000, so the personal allowance is withdrawn at £1 for every £2 above it.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 £179,795 sits in the marginal relief band, so corporation tax works out between 19% and 25% (£41,162 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)
£104,355
£8,696 per month
Tax burden: 46.6%
Gross income£195,500
Employer NI & levy−£25,587
Income tax−£60,150
Employee NI−£5,409
Take home£104,355
Outside IR35 (Ltd Co)· keeps more
£110,182
£9,182 per month
Tax burden: 43.6%
Gross revenue£195,500
Employer NI−£1,136
Expenses−£2,000
Corporation tax−£41,162
Dividend tax−£41,021
Take home£110,182
Annual gross
£195,500
Daily rate
£850
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.