Question 1

What is contractor take-home pay in the UK in 2026-27?

Accepted Answer

A £400/day contractor on 220 days (£88,000/year) takes home approximately £59,000 inside IR35 (PAYE) or £62,000–£65,000 outside IR35 via a Limited Company in 2026-27. The difference depends on IR35 status and how dividends are structured. Dividend tax increased to 10.75% (basic) from April 2026.

Question 2

What changed for contractors in April 2026?

Accepted Answer

From April 2026, the dividend tax basic rate rose from 8.75% to 10.75% and the higher rate from 33.75% to 35.75%. This reduced the take-home advantage of operating outside IR35 through a Limited Company by approximately £500–£1,500/year depending on day rate. Employer NI also increased to 15% from April 2025.

Question 3

Is it better to be inside or outside IR35 in 2026-27?

Accepted Answer

Outside IR35 via a Limited Company typically gives higher take-home, but the gap narrowed significantly after the 2026 dividend tax increase. For many contractors at £300–£500/day, the net advantage is £3,000–£6,000/year. IR35 status is a legal determination based on working practices — not a choice. Consult an IR35 specialist before assuming outside status.

Question 4

What is the umbrella company rate vs Ltd Company for contractors?

Accepted Answer

Umbrella companies treat you as an employee: you pay PAYE income tax and National Insurance on all earnings above £12,570. A Limited Company outside IR35 lets you split income between salary and dividends, reducing NI. Umbrella is simpler and suited to short contracts or uncertain IR35 status. Ltd is more tax-efficient for long-term outside-IR35 engagements.

Question 5

How does salary sacrifice help contractors inside IR35?

Accepted Answer

Inside IR35 contractors can use salary sacrifice pension contributions to reduce PAYE deductions. Each £1 sacrificed saves income tax (20–40%) and National Insurance (8–2%), with total savings of 28–42p per £1 depending on income level. Many umbrella companies and agency-PAYE arrangements support salary sacrifice — check with your employer of record.

Day Rate	Annualised	Take-Home/yr	Take-Home/mo	Details
£200/day	£44,000/yr	£33,440	£2,787/mo	Full breakdown →
£250/day	£55,000/yr	£40,807	£3,401/mo	Full breakdown →
£300/day	£66,000/yr	£46,857	£3,905/mo	Full breakdown →
£350/day	£77,000/yr	£52,907	£4,409/mo	Full breakdown →
£400/day	£88,000/yr	£58,957	£4,913/mo	Full breakdown →
£450/day	£99,000/yr	£65,007	£5,417/mo	Full breakdown →
£500/day	£110,000/yr	£70,157	£5,846/mo	Full breakdown →
£550/day	£121,000/yr	£74,117	£6,176/mo	Full breakdown →
£600/day	£132,000/yr	£77,488	£6,457/mo	Full breakdown →
£650/day	£143,000/yr	£83,015	£6,918/mo	Full breakdown →
£700/day	£154,000/yr	£88,543	£7,379/mo	Full breakdown →
£750/day	£165,000/yr	£94,070	£7,839/mo	Full breakdown →
£800/day	£176,000/yr	£99,598	£8,300/mo	Full breakdown →
£1,000/day	£220,000/yr	£121,708	£10,142/mo	Full breakdown →

Contractor Pay UK 2026-27

Day-Rate Take-Home (PAYE, 220 days)