Contractor Rate Increase Calculator 2026/27
What a day rate rise is actually worth after tax, the rate you need to hit a target take-home, and whether your rate has kept pace with inflation. Everything recalculates as you type.
Work out the rate
Excluding VAT, as invoiced or as the assignment rate
A flat £-per-day increase
Money in your personal bank account, after all tax
The tool solves for the day rate that produces it
Calendar-year average CPI, 1988 onwards
Default 44 — eight weeks off for holiday, bank holidays, illness and gaps
= 220 billable days a year
All post-tax profit taken as dividends
£6,708 is the lowest that still buys a qualifying NI year
Accountancy, insurance, software — unchanged by the rise
Fixed fee, so a rise does not increase it
Applies where the umbrella’s pay bill exceeds £3m
Where the extra gross goes
The rise, by period
Either way
Click any row to load that rate into the calculator.
| Current rate | Extra billed a year | Extra take-home — company | Extra take-home — umbrella | Company keeps | Load |
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No. On the default assumptions — 220 billable days, a £12,570 director’s salary, £2,000 of annual company costs and 2026/27 rates — a limited company contractor going from £500 to £550 a day bills £11,000 more and keeps £5,194.61 of it, about 47.2%. The same rise through an umbrella at a £110-a-month margin is worth £4,670.13, about 42.5%. The rest goes to corporation tax, dividend tax, income tax, employee NIC and employer NIC.
On the default assumptions and 2026/27 rates, £60,000 of annual take-home needs about £414 a day through a limited company or about £451 a day through an umbrella, at 220 billable days. Change the billable days and the answer moves roughly in inverse proportion: at 200 days you need more per day for the same annual figure.
This calculator defaults to 44 weeks at 5 days, which is 220 billable days. That leaves eight weeks a year for holiday, bank holidays, illness and gaps between contracts. It is an assumption, not a rule — if you routinely bill 46 weeks, or four days a week, change the two inputs. The assumption is shown on the page rather than hidden in the code because it drives every annual figure here.
Use the CPI index, not an average percentage. A rate agreed in 2019, when the CPI annual average index stood at 107.8, needs multiplying by 142.5 ÷ 107.8 = 1.322 to match June 2026 prices — so £450 a day in 2019 is £594.85 a day today, a 32.2% rise. The index figures are ONS series D7BT (CPI all items, 2015=100), dataset MM23.
An umbrella assignment rate has to cover the umbrella’s margin, employer NIC at 15% above the £5,000 secondary threshold, and the 0.5% Apprenticeship Levy where the umbrella’s pay bill exceeds £3m, before any of it becomes your gross pay. About 13.4% of an assignment rate rise — £1 in every £7.45 — is absorbed before PAYE even starts. What is left is then taxed at your marginal rate — 42% for most higher-rate contractors, and 62% in the £100,000 to £125,140 personal allowance taper.
Yes, for a limited company contractor. The dividend ordinary rate rose from 8.75% to 10.75% and the upper rate from 33.75% to 35.75% on 6 April 2026. The additional rate is unchanged at 39.35%. On the £500 to £550 example, a higher-rate contractor keeps £5,194.61 of the £11,000 in 2026/27 against £5,356.31 on 2025/26 rates — £161.70 less for exactly the same rise. Umbrella take-home is unaffected, because umbrella pay is not dividend income.
How this calculator works
A rate rise is negotiated in gross pounds per day and received in net pounds per month, and the two numbers are a long way apart. This page does the conversion in both directions, and shows the arithmetic rather than just the answer.
The stated assumptions
Every annual figure on this page rests on 44 weeks × 5 days = 220 billable days. Both numbers are inputs; nothing is hidden. The other assumptions, all editable where they apply:
- Limited company: a director’s salary of £12,570 (the personal allowance), £2,000 of annual company costs, and every penny of post-tax profit taken as dividends in the same year. No pension contribution, no retained profit, no associated companies, one director only.
- Umbrella: a fixed £110-a-month margin, no employer pension contribution, and the 0.5% Apprenticeship Levy deducted. Holiday pay is treated as a component of gross pay at 12.07% rather than an addition to it, so it does not change take-home either way.
- Both: England, Wales or Northern Ireland rates, no student loan, no other income, no expenses claimed personally. Day rates are exclusive of VAT throughout — VAT is the client’s money passing through, and a rate rise does not change your VAT position.
Mode 1 — what would a rise give me?
The tool builds a complete take-home figure at your current rate, builds a second at the new rate, and reports the difference. That is deliberately slower than applying a single marginal rate, because a single marginal rate is often wrong: the extra income can cross the higher-rate threshold, cross the £50,000 corporation tax marginal relief floor, or drag you into the personal allowance taper part-way through the rise.
Umbrella: assignment = rate × days → solve A − M = G + 15% × max(0, G − £5,000) + 0.5% × G for gross pay G → take-home = G − income tax − employee NIC
Employer NIC and the Apprenticeship Levy are charged on gross pay, so gross pay has to be solved for rather than subtracted to. Rearranged, that is G = (A − M + 15% × £5,000) ÷ 1.155 whenever G exceeds the £5,000 secondary threshold.
Mode 2 — what rate do I need?
There is no closed-form inverse for the take-home function — it has kinks at every band edge — so the tool solves it numerically by bisection, to the penny, then rounds the answer up to the next whole pound. It reports the take-home actually delivered at that rounded rate, which is a little above your target rather than a little below.
Mode 3 — keeping up with inflation
Percentages compound, so “inflation has been about 3% a year” is not a usable calculation over several years. The correct method is the index ratio:
This page uses the ONS CPI all-items index, 2015=100 (series D7BT, dataset MM23). The base is the calendar-year annual average for the year you pick, and the target is June 2026 = 142.5, the latest published month. Annual averages are published from 1988, so the year selector stops there; nothing is extrapolated beyond the published series, and there is no 2026 annual average yet. If you want a month-to-month figure rather than year-to-June, use the inflation calculator.
The traps
- The 62% band. Between £100,000 and £125,140 of adjusted net income the personal allowance is withdrawn at £1 for every £2, which makes the effective marginal rate on employment income 62% (40% tax + 20% lost allowance + 2% NIC). A rise that starts below £100,000 and ends above it is worth much less at the top than at the bottom — the tool splits it correctly.
- Corporation tax marginal relief. Company profits between £50,000 and £250,000 are effectively taxed at 26.5%, not 19% and not 25%. A rise that pushes profit through £50,000 changes the rate on the extra, not on the whole.
- The dividend allowance is a nil-rate band, not a deduction. The first £500 of dividends is charged at 0% but still uses up basic-rate band, so it does not shelter £500 of higher-rate dividends. It is worth £53.75 to a basic-rate shareholder and £178.75 to a higher-rate one.
- Employer NIC is not in your marginal ladder. For an umbrella worker it comes out of the assignment rate before gross pay exists; for a company director it is a company cost that reduces distributable profit. Either way it is real money out of the rise.
- The National Living Wage floor. An umbrella must pay at least £12.71 an hour from 1 April 2026. At very low assignment rates the arithmetic above produces gross pay below the floor, and the tool says so.
A note on negotiating
Two things are worth knowing before the conversation. First, your rate and the client’s charge rate are different numbers: an agency bills the client and pays you the difference less its margin, so a rise you ask for may be absorbed by the agency, passed to the client, or refused, and it is reasonable to ask which. Second, the numbers that carry weight are specific ones — the market rate for your skill, sector and location, the CPI catch-up figure from mode 3, and the cost to the client of replacing and re-inducting you — rather than a general statement that costs have gone up. A rise is normally agreed at extension or renewal, and a signed contract cannot be re-priced mid-term without the client’s agreement.
Note also how days trade against rate. At 220 billable days a £25-a-day rise adds £5,500 to annual billings, while a single unbilled week at £550 a day costs £2,750 — exactly half of it. Two extra billable weeks are worth more than a £25 rise; two lost weeks wipe it out. Both sides of that are inputs on this page.
This calculator provides arithmetic calculations only, on the stated assumptions, and is not tax advice. It ignores student loan repayments, pension contributions, other income, Scottish income tax rates and personal expense claims. Verify with HMRC rates and allowances or a qualified accountant. CPI figures are ONS series D7BT, dataset MM23, latest month June 2026.