Umbrella vs Limited Company Calculator United Kingdom

Contractors working outside IR35 can run every invoice through an umbrella company on full PAYE, or set up their own limited company and pay themselves a small salary plus dividends. This calculator estimates both routes side by side at 2026/27 Income Tax, National Insurance and dividend rates, so you can see roughly what the limited company structure is worth before weighing up the extra admin.

How the umbrella route works

An umbrella company employs you and pays the contract value as salary. It first takes its margin, a fixed yearly fee for running the payroll. What remains has to cover employer National Insurance as well as your own PAYE, because the full employment tax applies. The calculator takes employer NI out of the money available to find your gross salary, then deducts Income Tax and employee National Insurance for your net pay. You get a payslip and have nothing to file yourself, but every pound is taxed as employment income, the most heavily taxed route.

How the limited company route works

Through your own company the money is taxed in two stages. You pay yourself a director salary, fixed here at the personal allowance, which is a deductible business cost and attracts little or no personal tax. The company pays employer National Insurance on the salary above the secondary threshold and your accountancy fees. The remaining profit pays Corporation Tax, and what is left can be taken as dividends, which carry no National Insurance and are taxed at lower rates than salary, with the first £500 tax-free.

The dividend tax bands

Dividends sit on top of your salary when working out their band. With a salary at the personal allowance, the whole basic rate band is available for dividends at 10.75%. Dividends in the higher rate band are taxed at 35.75%, and in the additional rate band at 39.35%. As the contract value rises, more dividends fall in the higher band, so the advantage of a limited company grows more slowly. The calculator applies each band in turn after deducting the £500 allowance.

A worked example

Take an £80,000 contract outside IR35, Corporation Tax at 25%, £1,500 of accountancy fees and a £1,200 umbrella margin. Through the umbrella, after the margin and full PAYE, take-home is about £50,678. Through a limited company, a salary at the personal allowance leaves profit that, after employer NI, fees and Corporation Tax, gives dividends of about £48,596; after dividend tax, take-home is about £53,272. The limited company is ahead by about £2,593 a year. At £40,000 with Corporation Tax at 19%, the gap is about £2,267.

Assumptions and limitations

This is a planning estimate, not tax advice. It assumes the contract is outside IR35 for the whole year and a director salary exactly at the personal allowance. It ignores business expenses, pension contributions, VAT, the employment allowance, student loan repayments and other income, all of which can change the numbers. The Corporation Tax rate is an input because it depends on company profit: 19% for profits under £50,000, 25% above £250,000 and marginal relief in between. The rates, thresholds and allowances are stored as parameters sourced from gov.uk and reviewed each tax year. Before a decision with real money attached, confirm the figures with an accountant who can model your full circumstances, including the cost and time of running a company.

About This Umbrella vs Limited Company Calculator

Use this umbrella vs limited company calculator to get an instant, accurate estimate. The figures follow official GOV.UK guidance and every rate and threshold is kept up to date for 2026. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.