2024/25 Tax Year

Umbrella company take-home pay — vs limited company

The UK umbrella calculator — enter your day rate and see exactly what you keep under both structures, with a full tax breakdown.

Limited Company (Ltd) vs Umbrella Company
Your details
What you charge clients per day
£ /day
Realistic days you expect to bill
days
Accountant, software, equipment
£
Umbrella margin / week £20/wk
Reputable umbrellas typically charge £15–£25/week
Ltd salary drawn £12,570
Usually set at personal allowance for tax efficiency
Winner
—
—
—
Limited Company
£0
estimated take-home per year
Gross revenue£0
Business expenses−£0
Accountant fees (est.)−£0
Employer's NI on salary−£0
Corporation tax (19%)−£0
Income tax + employee NI−£0
Dividend tax−£0
Net take-home£0
Umbrella Company
£0
estimated take-home per year
Gross contract value£0
Umbrella margin−£0
Employer's NI (13.8%)−£0
Apprenticeship levy (0.5%)−£0
Gross pay (deemed salary)£0
Income tax (PAYE)−£0
Employee's NI−£0
Net take-home£0
Effective take-home rate
Ltd Co —%
Umbrella —%
Monthly take-home
Ltd Co —
Umbrella —
Annual difference
Ltd vs Umb —
per year
⚠ These are estimates based on 2024/25 UK tax rates. The Ltd Co model assumes the optimal salary/dividend split and includes a £1,500/year accountant estimate. Individual circumstances vary. Always take professional advice before choosing your trading structure.
Limited company — consider if…
You earn over £300/day and contract regularly
You're outside IR35 (or mostly outside)
You want to retain profits in the company
You're comfortable with annual admin and filing
You want more control over your tax affairs
You plan to employ others or take on subcontractors
Umbrella — consider if…
You're inside IR35 (the tax benefit disappears)
You're new to contracting and want simplicity
You have short or irregular contracts
You want statutory employment rights (holiday pay, SSP)
You prefer a single PAYE payslip each month
You don't want to deal with Companies House or HMRC filings

Common questions

What's the main tax difference between limited company and umbrella?

With a limited company outside IR35, you take a small salary (usually set at the personal allowance) and extract the rest as dividends. Dividends are taxed at lower rates than income and don't attract National Insurance, which is where the tax advantage comes from. You also pay corporation tax at 19% on profits before distributing them, but the overall effective rate is still usually lower than PAYE.

With an umbrella, you're an employee of the umbrella company. Your entire contract value is subject to employer's NI (13.8%), then the remainder is treated as salary subject to income tax and employee's NI. There's no dividend option. For most day rates, this results in a meaningfully lower take-home than a well-run limited company outside IR35.

At what day rate does a limited company stop being worth it?

The commonly quoted threshold is around £150–£200/day, below which the admin overhead of running a limited company starts to erode the tax saving. You'll typically pay £800–£2,000/year for a contractor accountant, plus Companies House fees and your own time — if the tax saving is only a few hundred pounds, umbrella simplicity wins.

At higher day rates the calculation changes. At £300/day the Ltd advantage is meaningful. At £500/day it's substantial — often £5,000–£10,000 more per year in take-home — and the accountant fee becomes a rounding error. Use the calculator above to see your specific figures.

Does umbrella give you employment rights that Ltd doesn't?

Yes — and it's one of the genuine advantages of umbrella that often gets overlooked. As an umbrella employee, you're entitled to statutory employment rights: Statutory Sick Pay (SSP), Statutory Maternity/Paternity Pay, auto-enrolment pension contributions, and holiday pay. As a limited company director, you have none of these statutory protections and must fund everything yourself.

In practice, many Ltd contractors simply build these costs into their rate and self-insure. But for someone returning from a career break, new to contracting, or with health concerns, the employment rights of umbrella aren't trivial.

What does a contractor accountant actually do, and do I need one?

A contractor accountant typically handles: setting up your limited company, registering for VAT and PAYE, processing your monthly payroll, filing quarterly VAT returns, preparing annual accounts, submitting your corporation tax return, and filing your personal self-assessment. They'll also advise on the most tax-efficient salary/dividend split each year.

You don't strictly need one — you can do all of this yourself or use accounting software like FreeAgent or Xero. But most contractors find the time cost isn't worth it, and a good accountant typically saves their fee many times over in legitimate tax efficiency. Expect to pay £75–£150/month for a specialist contractor accountant.

What are the risks of umbrella companies I should know about?

The main risk is disguised remuneration or "mini umbrella" schemes, which HMRC has aggressively targeted. These schemes promise unusually high take-home pay (often 85%+) by artificially structuring payments to avoid tax. Contractors who use them can be held liable for the unpaid tax — even if they didn't understand how the scheme worked. If an umbrella is promising take-home significantly above what this calculator shows, treat it as a red flag.

Stick to FCSA-accredited (Freelancer & Contractor Services Association) umbrella companies. They operate to a professional code of conduct and won't put you at tax risk. The margin you pay them is the price of that protection.

Can I switch between limited company and umbrella?

Yes, and many contractors do — particularly when moving between inside and outside IR35 contracts. There's no legal barrier to closing a limited company (or simply making it dormant) and moving to umbrella, or vice versa. The main practical consideration is timing: dormant company filing obligations continue until you formally dissolve the company, which takes a few months.

Some accountants recommend keeping the limited company dormant rather than dissolving it, especially if you think you'll return to outside IR35 contracting within a couple of years — the setup cost and time to incorporate again can be avoided.

Umbrella Company Take-Home Pay Calculator 2024/25 — Ltd vs Umbrella
2024/25 Tax Year

Umbrella company take-home pay — vs limited company

The UK umbrella calculator — enter your day rate and see exactly what you keep under both structures, with a full tax breakdown.

Limited Company (Ltd) vs Umbrella Company
Your details
What you charge clients per day
£ /day
Realistic days you expect to bill
days
Accountant, software, equipment
£
Umbrella margin / week £20/wk
Reputable umbrellas typically charge £15–£25/week
Ltd salary drawn £12,570
Usually set at personal allowance for tax efficiency
Winner
—
—
—
Limited Company
£0
estimated take-home per year
Gross revenue£0
Business expenses−£0
Accountant fees (est.)−£0
Employer's NI on salary−£0
Corporation tax (19%)−£0
Income tax + employee NI−£0
Dividend tax−£0
Net take-home£0
Umbrella Company
£0
estimated take-home per year
Gross contract value£0
Umbrella margin−£0
Employer's NI (13.8%)−£0
Apprenticeship levy (0.5%)−£0
Gross pay (deemed salary)£0
Income tax (PAYE)−£0
Employee's NI−£0
Net take-home£0
Effective take-home rate
Ltd Co —%
Umbrella —%
Monthly take-home
Ltd Co —
Umbrella —
Annual difference
Ltd vs Umb —
per year
⚠ These are estimates based on 2024/25 UK tax rates. The Ltd Co model assumes the optimal salary/dividend split and includes a £1,500/year accountant estimate. Individual circumstances vary. Always take professional advice before choosing your trading structure.
Limited company — consider if…
You earn over £300/day and contract regularly
You're outside IR35 (or mostly outside)
You want to retain profits in the company
You're comfortable with annual admin and filing
You want more control over your tax affairs
You plan to employ others or take on subcontractors
Umbrella — consider if…
You're inside IR35 (the tax benefit disappears)
You're new to contracting and want simplicity
You have short or irregular contracts
You want statutory employment rights (holiday pay, SSP)
You prefer a single PAYE payslip each month
You don't want to deal with Companies House or HMRC filings

Common questions

What's the main tax difference between limited company and umbrella?

With a limited company outside IR35, you take a small salary (usually set at the personal allowance) and extract the rest as dividends. Dividends are taxed at lower rates than income and don't attract National Insurance, which is where the tax advantage comes from. You also pay corporation tax at 19% on profits before distributing them, but the overall effective rate is still usually lower than PAYE.

With an umbrella, you're an employee of the umbrella company. Your entire contract value is subject to employer's NI (13.8%), then the remainder is treated as salary subject to income tax and employee's NI. There's no dividend option. For most day rates, this results in a meaningfully lower take-home than a well-run limited company outside IR35.

At what day rate does a limited company stop being worth it?

The commonly quoted threshold is around £150–£200/day, below which the admin overhead of running a limited company starts to erode the tax saving. You'll typically pay £800–£2,000/year for a contractor accountant, plus Companies House fees and your own time — if the tax saving is only a few hundred pounds, umbrella simplicity wins.

At higher day rates the calculation changes. At £300/day the Ltd advantage is meaningful. At £500/day it's substantial — often £5,000–£10,000 more per year in take-home — and the accountant fee becomes a rounding error. Use the calculator above to see your specific figures.

Does umbrella give you employment rights that Ltd doesn't?

Yes — and it's one of the genuine advantages of umbrella that often gets overlooked. As an umbrella employee, you're entitled to statutory employment rights: Statutory Sick Pay (SSP), Statutory Maternity/Paternity Pay, auto-enrolment pension contributions, and holiday pay. As a limited company director, you have none of these statutory protections and must fund everything yourself.

In practice, many Ltd contractors simply build these costs into their rate and self-insure. But for someone returning from a career break, new to contracting, or with health concerns, the employment rights of umbrella aren't trivial.

What does a contractor accountant actually do, and do I need one?

A contractor accountant typically handles: setting up your limited company, registering for VAT and PAYE, processing your monthly payroll, filing quarterly VAT returns, preparing annual accounts, submitting your corporation tax return, and filing your personal self-assessment. They'll also advise on the most tax-efficient salary/dividend split each year.

You don't strictly need one — you can do all of this yourself or use accounting software like FreeAgent or Xero. But most contractors find the time cost isn't worth it, and a good accountant typically saves their fee many times over in legitimate tax efficiency. Expect to pay £75–£150/month for a specialist contractor accountant.

What are the risks of umbrella companies I should know about?

The main risk is disguised remuneration or "mini umbrella" schemes, which HMRC has aggressively targeted. These schemes promise unusually high take-home pay (often 85%+) by artificially structuring payments to avoid tax. Contractors who use them can be held liable for the unpaid tax — even if they didn't understand how the scheme worked. If an umbrella is promising take-home significantly above what this calculator shows, treat it as a red flag.

Stick to FCSA-accredited (Freelancer & Contractor Services Association) umbrella companies. They operate to a professional code of conduct and won't put you at tax risk. The margin you pay them is the price of that protection.

Can I switch between limited company and umbrella?

Yes, and many contractors do — particularly when moving between inside and outside IR35 contracts. There's no legal barrier to closing a limited company (or simply making it dormant) and moving to umbrella, or vice versa. The main practical consideration is timing: dormant company filing obligations continue until you formally dissolve the company, which takes a few months.

Some accountants recommend keeping the limited company dormant rather than dissolving it, especially if you think you'll return to outside IR35 contracting within a couple of years — the setup cost and time to incorporate again can be avoided.