Permanent vs Contract Calculator

We total the permanent package — salary, bonus, employer pension and any other benefits — then divide by the days you would actually bill and add your business costs. On the default assumptions a £65,000 salary with a 5% employer pension and 33 days paid leave needs about £305 a day to match the cash, or about £319 a day to also replace the £3,250 employer pension, at 220 billable days.

Switch on Show take-home pay after tax and the break-even figure is solved differently: the calculator searches for the day rate at which your contract take-home equals your permanent take-home, running the full 2026/27 arithmetic on both sides rather than comparing gross figures.

Outside IR35 you invoice through your own limited company and take a small salary plus dividends. The company pays corporation tax at 19% up to £50,000 of profit and 25% above £250,000, with marginal relief in between, and you pay dividend tax at 10.75% / 35.75% on what is left after a £500 nil-rate band.

Inside IR35 the assignment is taxed as employment. Through an umbrella, the margin and employer National Insurance at 15% above £5,000 come out of the assignment rate before your gross pay is calculated, then income tax and employee NIC come out of the gross. On the same headline rate that is usually several thousand pounds a year less in your pocket than the limited company route — switch the IR35 box above to see it on your own numbers.

The umbrella rules changed in April 2026, but only for who HMRC can chase: agencies and clients now carry joint and several liability for PAYE failures in the chain. It does not change a worker's take-home by a penny.

A permanent employee is paid for 52 weeks but works about 45 or 46 of them. A contractor only earns on the days they invoice. At a rate of £500 a day the 40 days of leave and contract gaps built into the default 44 working weeks cost £20,000 of fees that never get billed — which is why the weeks-worked box matters more than the day rate itself.

Inside IR35 through an umbrella you do accrue holiday pay at 12.07%, but it is carved out of your gross pay rather than added on top, so it does not change the annual total.

Everything the employer pays for that you would otherwise fund yourself. Four of them have a cash value you can type into the boxes above: the employer pension (3% to 10% of salary is the usual range), paid leave (28 days is the statutory minimum and it can include bank holidays; 33 days is the common offer), a bonus you would genuinely expect to receive, and the cash value of medical cover, life cover, a car allowance or a training budget — put that last group in Other benefits above.

Then there are the ones with no honest price. Statutory sick pay is £123.25 a week from April 2026, or 80% of your average weekly earnings if that is lower, and there are no longer any waiting days before it starts. Redundancy rights, a notice period, and the plain fact that the salary arrives whether the work does or not are all worth something a spreadsheet will not tell you. A generous package — strong pension, real bonus, benefits with a cash value — adds roughly 15% to 25% on top of base salary, and this calculator shows you that as the gap between the base salary and the total package value.

Accountancy at roughly £100–£150 a month, professional indemnity cover at £200–£400 a year, public liability at £100–£200, plus bank charges, software and equipment. £2,000–£3,000 a year is typical for a one-person company.

Two costs people forget: the employer National Insurance your own company pays on your director's salary — 15% of everything above £5,000, so £1,136 a year on a £12,570 salary — and the fact that the £10,500 Employment Allowance is generally not available to a single-director company with no other employees, so it cannot be used to cover it. Set the salary to £5,000 instead and the employer NIC disappears, at the cost of some corporation tax relief.

Not always. Day rates look higher because they are quoted per day, and a permanent package hides most of its value. Two things flip the answer on this page's own defaults.

Weeks worked. Take the £500 a day down from 44 weeks to 26 and the permanent role wins on take-home, by about £555 a year — the break-even rate has climbed from £300 to £508 a day because you are billing 130 days instead of 220. Nothing about the rate changed; only the year did.

A strong permanent package. A £95,000 salary with a 10% employer pension and a £9,500 bonus is worth about £1,280 a year more in take-home than £500 a day outside IR35 at 44 weeks, and it would take about £512 a day to catch it. Put the same comparison inside IR35 and the gap widens again: on the defaults here, an umbrella pays roughly £3,100 a year less than your own limited company on an identical £500 assignment rate.

One thing that matters here, and it lands on the limited company side: the dividend ordinary rate rose from 8.75% to 10.75% and the upper rate from 33.75% to 35.75% from 6 April 2026. The additional rate is unchanged at 39.35% and the dividend allowance is still £500. On £110,000 of fees a year that is roughly £1,450 more dividend tax than the same figures would have produced last year.

Everything else this calculator touches was held: personal allowance £12,570, higher-rate threshold £50,270, employee NIC 8% and 2%, employer NIC 15% above a £5,000 secondary threshold, corporation tax 19% and 25% with marginal relief between £50,000 and £250,000. The freeze on those thresholds now runs to 5 April 2031, so fiscal drag keeps doing the work.

Use the year switch at the top of the calculator to see the same comparison on 2025/26 dividend rates.