Contractor Day Rate Calculator UK 2025/26

A typical contractor works around 220 chargeable days per year (allowing for holidays, sick days, and bench time). Multiply your day rate by 220 to get an approximate annual contract value. A £500/day rate ≈ £110,000/yr gross contract value. This calculator accepts an annual salary input — enter your annualised rate directly.

Outside IR35 via your own limited company (PSC) you can extract income as a combination of a low salary (below the NI threshold) and dividends taxed at lower dividend rates. This typically results in 70–75% retention. Inside IR35 your income is treated as employment income and taxed accordingly, leaving 55–60% retention. The exact gap depends on your rate, expenses, and pension contributions.

An umbrella company employs you on PAYE terms and handles invoicing the agency or end-client. It is simpler than running your own PSC but provides no tax efficiency beyond PAYE. It is the default choice for contractors working inside IR35 who do not want the admin burden of a limited company.

220 days is a common benchmark for a full-time contractor taking 4 weeks holiday and some ad hoc downtime. If you work part-time or have regular bench periods, adjust accordingly. Note that contracting through a PSC also means periods without income attract no benefits — factor this into your break-even calculation.

Outside IR35, your PSC can make employer pension contributions directly — these are an allowable business expense for the company and do not attract employer NI. This is extremely tax efficient. Inside IR35 or via umbrella, salary sacrifice is available but operates the same as for a permanent employee.