Calculator
Contractor vs Permanent Pay Calculator for London and the UK
Pick your starting point — LTD, umbrella, permanent or fixed-term — and see what you’d need to earn in every other route to take home the same amount.
I currently earn as:
Settings
LTD Company
Your annual take-home
£74,407
£6,201/month
Effective day rate
£343
Into pension
—
Total package
£74,407
Out of £119,350 revenue, before personal tax
To match take-home and pension...
What you would need to earn in each other route to match your LTD Company take-home of £74,407 plus £0 into your pension. Adjust assumptions on each card to refine.
To match this via
Umbrella
You would need a day rate of
£551/day
217 billable days a year
Annual take-home
£66,262
Monthly
£5,522
Effective day rate
£305
Total package
£74,350
Into pension
£8,088
Bonus
—
Employer-side costs
£18,470
To match this via
Permanent
You would need a salary of
£89,299
Annual take-home
£64,583
Monthly
£5,382
Effective day rate
£285
Total package
£76,406
Into pension
£9,823
Bonus
£8,930
Employer-side costs
£19,196
To match this via
Fixed-Term Contract
You would need a salary of
£98,229
Annual take-home
£64,583
Monthly
£5,382
Effective day rate
£285
Total package
£74,406
Into pension
£9,823
Bonus
—
Employer-side costs
£18,896
What this contractor vs permanent calculator actually compares
Most contractor calculators give you a single “take-home” number and call it done. That is misleading because it ignores half the picture — and it doesn’t answer the question you actually have: “what would I need to earn in a different route to take home the same amount?”
This calculator works differently. You pick your starting point — whether that’s a contractor day rate, an umbrella assignment, a permanent salary or a fixed-term contract — and it shows you the equivalent you would need in every other route to take home the same amount. Each equivalent comes with a full breakdown so you can see exactly where the money goes.
It also separates cash in pocket from total package value. A permanent role at £75,000 with a 10% bonus, 5% employer pension, 25 days’ leave and private medical could be worth well over £90,000 in total annual reward. A £550/day contractor taking 25 days’ holiday, paying an accountant and insurance, and getting no employer pension has a very different total picture — even if the headline take-home looks higher.
LTD vs umbrella vs permanent: the real differences
LTD Company (Outside IR35)
You invoice through your own limited company. Revenue = day rate x billable days. You pay yourself a tax-efficient salary (typically at the Personal Allowance level), take the rest as dividends after corporation tax, and deduct accountancy, insurance, equipment, software and other business costs. Corporation Tax is the big one people forget: it comes off company profit before you can pay yourself a dividend, and you pay dividend tax on top of that. No paid leave — every day off is a day you don’t bill. This route usually gives the highest take-home, but it carries more admin, no employment rights, and HMRC scrutiny if the role could be inside IR35.
Umbrella Company
You are employed by the umbrella company and paid through PAYE. The assignment rate (your day rate) covers the umbrella margin, employer NIC, employer pension, Apprenticeship Levy and your gross pay — all before you see a payslip. Holiday pay is typically rolled up into each payment or accrued and paid when you take leave. Take-home is lower than LTD, but you get employment rights and simpler tax affairs.
Fixed-Term Contract (PAYE)
You are directly employed by the hiring organisation on a fixed-term basis. UK law says fixed-term employees must not be treated less favourably than comparable permanent employees — you should get the same pay, conditions, and benefits package unless there is an objective reason not to. The maths is essentially the same as permanent, but the contract has an end date.
Permanent Employment
Salary through PAYE plus bonus, employer pension, stock/RSUs, benefits, and paid annual leave. The total package value is usually significantly higher than the headline salary suggests — especially when employer pension matching and equity are included. This route offers the most stability but typically the lowest headline take-home.
How unpaid contractor holiday changes your effective income
This is one of the biggest distortions in bad contractor calculators. A permanent employee taking 25 days of annual leave plus 8 bank holidays loses zero income — they are paid for those 33 days. A contractor taking the same time off loses 33 billable days.
At £550/day, 33 unpaid days off costs you £18,150 in lost revenue. That is not a rounding error — it is the difference between a £550/day contract looking equivalent to a £90,000 permanent salary and it actually being closer to £70,000 when you factor in total package.
Use the holiday slider in the calculator to test this yourself. Try 10 days vs 25 days vs 33 days and watch how dramatically the effective day rate and annual take-home change.
“The headline day rate is never the full picture. What matters is what you actually keep after tax, holidays and costs — and how that stacks up against the permanent package you’d be giving up.”
What salary equals a £550 day rate in London?
This is the question every contractor and hiring manager gets wrong. The answer depends entirely on what you include. Here are realistic London examples using typical market rates. My husband and I both contract in London — we take the 8 bank holidays and typically an extra 7 days off per year, so we’ve used an average of 15 days total holiday for the contractor figures.
| Role | Day rate | LTD take-home | Perm salary | Perm take-home + pension |
|---|---|---|---|---|
| Programme Manager | £650 | ~£89,500 | £90,000 | ~£74,900 |
| Project Manager | £550 | ~£81,600 | £75,000 | ~£64,200 |
| Scrum Master | £500 | ~£76,500 | £70,000 | ~£60,600 |
| Business Analyst | £500 | ~£76,500 | £65,000 | ~£57,000 |
| Solution Architect | £700 | ~£94,400 | £95,000 | ~£78,500 |
Both columns are money you actually keep, so they compare like for like: cash in the bank plus anything paid into a pension. The permanent figure is lower than the headline salary because it is after tax — the pension and benefits sit on top. Assumptions: LTD with 7 days holiday plus 8 bank holidays off (15 total), £1,500 accountant, £500 insurance, no company pension contribution. Permanent with 10% bonus, 5% employer pension, 5% employee pension, 25 days leave, 8 bank holidays. 2025/26 tax year, England/Wales. Run your own numbers in the calculator above.
How employers should compare contractor cost with permanent hiring
If you are a hiring manager, the question isn’t “what does the contractor cost per day?” — it’s “what is the total cost of this engagement compared to hiring permanently?”
A contractor at £550/day working 217 billable days costs £119,350 in assignment fees — and if the contractor is VAT-registered (which most LTD company contractors are), the employer also pays 20% VAT on top, making the real cost closer to £143,220. A permanent hire at £75,000 costs the employer approximately £91,000 with no bonus, rising to around £100,000 once you add a 10% bonus, employer NIC (15% above £5,000 since April 2025), pension contributions, and benefits. The contractor costs significantly more per year — but brings no recruitment fee, no notice period, and no long-term commitment.
Use the calculator above to compare directly — select “Permanent” as your starting route and enter the salary, then see what day rate you’d need as LTD or umbrella to match.
London examples: Programme Manager, Project Manager, Business Analyst and Solution Architect
The London market for programme management, project delivery and architecture roles sits in a band between roughly £450/day and £750/day for contractors, with permanent equivalents typically ranging from £65,000 to £100,000 depending on sector, seniority and specialism.
Insurance and fintech tend to sit at the higher end. Manufacturing, media and information services vary more widely depending on the specific transformation programme. These are the sectors I see most frequently from running delivery engagements across organisations like Elsevier, WhatsApp, Publicis, WPP and Hexagon.
Select any of the London presets at the top of the calculator to load a realistic day rate and salary pairing, then switch between starting routes to see the equivalents instantly.
Frequently asked questions
What is IR35 and how does it affect this calculator?
IR35 is HMRC’s legislation designed so that people working like employees through their own limited company pay broadly the same tax as employees. If your role is “inside IR35”, the LTD company route won’t give you the tax advantages shown here — you’d effectively be taxed as an employee. This calculator models the LTD route as outside IR35. If you are inside IR35, select Umbrella or Permanent as your starting route instead.
How does the umbrella holiday pay calculation work?
Umbrella companies handle holiday pay in one of two ways: “rolled up” into each payslip (you get slightly more per payment but nothing when you take leave) or “accrued” (set aside and paid when you actually take time off). Either way, the annual total should be the same — the statutory entitlement is 5.6 weeks. This calculator assumes accrued holiday pay is paid out across the year for a fair annual comparison.
Why is “total package value” different from take-home pay?
Take-home pay is what hits your bank account. Total package value adds employer pension contributions, your own pension contributions, bonus, stock/RSUs and benefits value. A permanent employee earning £75,000 with a 5% employer pension match, 10% bonus and £2,000 in benefits has a total package over £90,000 — even though their monthly take-home is much lower than a contractor earning a similar headline amount.
What director salary does the LTD calculation use?
By default, the calculator sets director salary at the Personal Allowance (£12,570 for 2025/26). For single-director companies that cannot claim Employment Allowance, this is generally the most tax-efficient level — you pay employer NIC on the amount above the £5,000 secondary threshold, but the corporation tax saving on the full salary as a business expense usually outweighs the NIC cost.
Is fixed-term the same as umbrella?
No. Umbrella workers are employed by the umbrella company and paid from the assignment rate after umbrella deductions. Fixed-term employees are directly employed by the hiring organisation with a contract end date. UK law requires fixed-term employees to receive the same pay, conditions and benefits as comparable permanent staff. The financial model is closer to permanent employment, not umbrella.
What changes in 2026/27?
The main change is dividend tax rates: the ordinary rate rises from 8.75% to 10.75% and the upper rate from 33.75% to 35.75%. This makes the LTD route slightly less tax-efficient. The Personal Allowance stays frozen at £12,570. Use the tax year dropdown to preview the impact.
Should I use this calculator as financial advice?
No. This calculator provides estimates based on current UK tax rules to help you compare routes. It is not a substitute for professional tax or financial advice. Your actual tax position will depend on your full personal circumstances, other income sources, and the specific details of your contract or employment. Always consult a qualified accountant before making decisions about how you work.
What this calculator includes
Tax & deductions
- Income Tax (England/Wales/NI and Scottish rates)
- Employee National Insurance
- Employer National Insurance (15% above £5,000)
- Corporation Tax (19% small profits / 25% main with marginal relief)
- Dividend tax with £500 allowance
- Student loan repayments (Plans 1, 2, 4, Postgrad)
- Personal Allowance tapering above £100,000
Package & costs
- Contractor holiday (unpaid days modelled as lost billing)
- Accountancy, insurance, equipment and software costs
- Umbrella margin, employer NIC, employer pension and Apprenticeship Levy
- Pension (employee + employer contributions, adjustable on every route)
- Company pension contributions paid before Corporation Tax
- Four, three or two-day weeks
- Bonus
- Stock / RSUs / equity
- Benefits value
- Paid vs unpaid leave comparison
Tax rates and thresholds are based on HMRC published rates for 2025/26 and announced changes for 2026/27. The base year is 260 weekdays at five days a week, pro-rated for shorter weeks. Employer NIC uses the £5,000 secondary threshold and 15% rate effective from April 2025. Auto-optimised director salary defaults to the Personal Allowance level. Umbrella calculations deduct the margin, employer NIC, employer pension and Apprenticeship Levy from the assignment rate, and model employee pension as salary sacrifice — which is how umbrellas normally run it, and why sacrificed pay escapes both employee and employer NIC. Permanent and fixed-term pension is modelled as a net-pay workplace scheme: relief from Income Tax, but National Insurance still charged on the full salary. Dividends are taxed at UK-wide rates and against UK-wide bands, including for Scottish taxpayers. This calculator does not model non-standard tax codes, VAT and the Flat Rate Scheme, capital allowances on individual assets, or multiple income sources.
About the author
