UK Contractor Take-Home Pay 2026/27: Limited Company vs Umbrella

The single most common question UK contractors ask is also the simplest: how much of my contract value do I actually keep? The answer for the 2026/27 tax year (6 April 2026 – 5 April 2027) depends almost entirely on one choice — whether you work through your own limited company or through an umbrella company.

On a £100,000 annual contract value, the difference is roughly £7,000–£10,000 a year in take-home pay. This guide walks through both routes line by line, using the actual 2026/27 HMRC figures, so you can see exactly where every pound goes.

The 2026/27 tax figures you need

Both routes start from the same HMRC rates for England, Wales and Northern Ireland:

• Personal allowance: £12,570 — the first £12,570 of income is tax-free. It tapers by £1 for every £2 earned over £100,000, disappearing at £125,140.
• Income tax: 20% basic rate to £50,270 · 40% higher rate to £125,140 · 45% additional rate above.
• Employee National Insurance: 8% on earnings between £12,570 and £50,270, then 2% above.
• Employer National Insurance: 15% on everything above £5,000 a year.

Scotland runs its own six-band system (starter 19%, basic 20%, intermediate 21%, higher 42%, advanced 45%, top 48% above £125,140) on the same £12,570 allowance — the worked examples below use England figures, but the principles are identical.

Route 1: Limited company (outside IR35)

Through your own personal service company, the client pays your company gross — the full £100,000. You then extract it tax-efficiently, typically as a small director's salary plus dividends:

1. Director's salary — set around the NI threshold (roughly £12,570). This is a deductible expense for the company, and at this level you pay virtually no income tax or employee NI on it.
2. Corporation tax — the company pays 19% on profits up to £50,000, 25% above £250,000, with marginal relief between. On £100k of profit after salary, that is roughly £19,000–£20,000.
3. Dividends — you distribute the remaining profit to yourself. The first £500 of dividends is tax-free (dividend allowance); above that, dividend tax is 10.75% (basic), 35.75% (higher) or 39.35% (additional) for 2026/27.
4. Expenses — legitimate business costs (travel, equipment, accountancy at £100–£150/month, training) reduce taxable profit before corporation tax.

Typical outcome on £100k: roughly £65,000–£68,000 in your pocket — about 65–68% retention. You also control timing: profits can be retained in the company for a leaner year.

Route 2: Umbrella company

An umbrella employs you. The agency pays the umbrella an assignment rate — and that rate must cover the cost of employing you, not just your wage. The deductions come off in this order:

1. Umbrella margin — the umbrella's fee, typically £15–£30 per week. This is the only fee the umbrella keeps.
2. Employer National Insurance — 15% on everything above £5,000. This is met out of the assignment rate before your gross pay is set.
3. Apprenticeship / Growth & Skills Levy — 0.5% where the umbrella's pay bill exceeds £3m; most large umbrellas pass it on.
4. Your gross pay — whatever remains. From this the umbrella deducts PAYE income tax (20/40/45%), employee NI (8%/2%), pension and any student loan.

Typical outcome on a £100k assignment rate: roughly £56,000–£59,000 take-home — about 56–59% retention. The gap versus the limited route is almost entirely the employer NI that comes out of the rate, plus the margin.

Side-by-side on £100,000

	Limited company	Umbrella
Contract value	£100,000	£100,000
Employer NI + levy	—	~£14,500
Umbrella margin	—	~£1,000
Income tax + employee NI	~£17,000*	~£27,000
Take-home	~£65–68k	~£56–59k

* Limited route tax is split between corporation tax and dividend tax rather than PAYE; the figure is the combined effective burden.

When does umbrella win?

The limited route is not always the right answer:

• Inside IR35 contracts — there is no tax advantage to a limited company inside IR35 anyway; the deemed payment rules wipe it out.
• Short assignments — for a 4–8 week contract, the admin of running a company (or paying an accountant £100–£150/month) can eat the saving.
• First-time contractors — umbrella means zero admin: no bookkeeping, no VAT, no filings.
• Employment rights — umbrella employees get holiday pay (usually 12.07% accrued), minimum wage protection and auto-enrolment pension.

The bottom line

Outside IR35 on a decent day rate, a limited company keeps meaningfully more of every contract — typically £7k–£10k a year on £100k. Inside IR35, or for short stints, umbrella is usually the pragmatic choice. Either way, the key discipline is the same: always know whether a quoted rate is the assignment rate or the rate after deductions, and get every deduction shown in writing.

Want your exact numbers? Run them through our free take-home pay calculator — salary or day rate in, every deduction shown line by line, England and Scotland supported.