Umbrella vs Limited Company Calculator

An umbrella company employs you directly — you submit timesheets, they invoice the client, deduct PAYE income tax and National Insurance, then pay you a net salary. A limited company means you run your own business: you invoice the client, pay corporation tax on profits, then pay yourself a mix of salary and dividends. Limited companies generally result in higher take-home pay but require more administration.

Not always — it depends on your income level, IR35 status, and how you structure your salary and dividends. At higher day rates outside IR35, a limited company is typically more tax-efficient. However, since corporation tax rose to 25% in 2023 for profits above £50,000, the advantage has narrowed. If you are inside IR35, umbrella is usually simpler and equally efficient.

Umbrella workers are taxed as employees under PAYE. For 2026/27: 0% on the first £12,570 (personal allowance), 20% basic rate up to £50,270, 40% higher rate up to £125,140, and 45% additional rate above £125,140. You also pay employee National Insurance at 8% on earnings between £12,570 and £50,270, and 2% above that.

At a typical £400/day rate (around £92,800/year), the saving can range from a few thousand to over £10,000 per year depending on your salary choice and profit level. The table on this page shows estimated savings at common day rates. Use the calculator above with your exact figures for a personalised comparison.

Running a limited company involves: annual accounts filed at Companies House, a self-assessment tax return, potentially quarterly VAT returns if turnover exceeds £90,000, employer PAYE administration, and usually an accountant fee of £80–£150 per month. You also have director responsibilities. The admin overhead makes limited companies most worthwhile for contractors on longer, higher-rate contracts.

Usually yes — most contracts allow a change of employment vehicle. You would need to incorporate a limited company (free via Companies House, takes 24 hours), set up a business bank account, and notify your agency or end-client. Timing it at the start of a new contract or tax year is tidiest.

If your contract is inside IR35, a limited company gives little to no advantage. Inside IR35 you are taxed very similarly to an employee regardless — the 5% expense allowance was removed in 2021. In that situation, operating through an umbrella company is usually simpler and just as tax-efficient. Use the IR35 Status Estimator to assess your status.