Salary vs Contracting Calculator 2026/27
Compare permanent employment against contracting to make an informed decision
Benefits of Permanent Employment
- Employer pension contributions (often 3-10%)
- Paid holiday (28+ days), sick pay, parental leave
- Job security and employment rights
- Training, career progression, company benefits
Benefits of Contracting
- Higher gross earnings potential
- Flexibility to choose projects and clients
- Tax-efficient extraction via dividends (outside IR35)
- Business expense deductions
IR35 Considerations
If you're inside IR35, you're taxed similarly to an employee but without the benefits. The day rate needs to be significantly higher to compensate.
What day rate equals my salary?
As a rule of thumb, divide your salary by 1000 and add 50% for equivalent value. A £60k salary needs roughly £90k+ in contracting revenue (£400-450/day).
How do I know my IR35 status?
For private sector, the end client determines your status. For public sector, you're likely inside IR35. Use HMRC's CEST tool for guidance.
Should I use an umbrella company?
Umbrellas are simpler but more expensive. You're taxed as an employee plus umbrella fees. Only consider if you can't operate outside IR35.
Disclaimer: This calculator provides estimates based on 2026/27 tax rates and simplified assumptions. Your actual position depends on IR35 status, expenses, dividend timing, and many other factors. Consult an accountant before making decisions.
Calculator reviewed by Waqas Sagar, updated May 2026.