Contractor Calculator UK
Model: your day rate times your billable days gives your gross annual income. Tax and National Insurance are then worked out with the same 2026/27 employed (PAYE) model as the Take Home Pay Calculator — pension comes off before income tax is worked out, but National Insurance is charged on the full gross. That is an employed-equivalent figure: it is the right comparison for an inside-IR35 contract or a permanent job, but it is NOT the tax bill of a limited company, which pays Corporation Tax and dividend tax instead. Figures are estimates, not tax advice.
Why 220 days?
There are 260 weekdays in a year. Nobody bills all of them. Take off 25 days of holiday and 8 bank holidays and you are at 227. Then allow for gaps between contracts, sick days, training and unpaid admin, and most contractors land on 220 to 230 billable days. This calculator defaults to 220 — change it to match your own year. If you work 4 days a week, try 176 days (44 weeks of 4 days). If you bill every weekday except holidays, try 227.
The number of days matters more than most people think. At £400 a day, ten extra billable days is £4,000 of gross pay — about £2,320 of take-home pay after 40% tax and 2% National Insurance. When you compare a contract with a permanent job, always compare on the same number of days: a permanent job pays you for holidays and sick days, a day-rate contract usually does not.
Worked example: £400 a day, 220 days, 5% pension
| Year | Month | Per working day | |
|---|---|---|---|
| Gross (400 × 220) | £88,000.00 | £7,333.33 | £400.00 |
| Pension (5%) | −£4,400.00 | −£366.67 | −£20.00 |
| Income tax | −£20,872.00 | −£1,739.33 | −£94.87 |
| National Insurance | −£3,770.60 | −£314.22 | −£17.14 |
| Take-home pay | £58,957.40 | £4,913.12 | £267.99 |
The income tax works out like this. Taxable income is £88,000 minus the £4,400 pension, which is £83,600. Take off the £12,570 personal allowance and £71,030 is taxable: £37,700 at 20% is £7,540, and the remaining £33,330 at 40% is £13,332, giving £20,872 in total. National Insurance is 8% on earnings between £12,570 and £50,270 (£3,016) plus 2% on the £37,730 above £50,270 (£754.60).
Day rate or salary? Compare like with like
A £400 day rate sounds like a lot next to a £60,000 salary, but the comparison is closer than it looks. The contractor on £400 a day over 220 days grosses £88,000 and keeps £58,957.40. An employee on £60,000 with a 5% pension keeps £43,556.40 a year. The contractor is ahead by about £15,400 — but the employee also gets paid holidays, sick pay, employer pension contributions on top of their salary, and job security. A common rule of thumb is that a day rate should be roughly your target salary divided by 200 to 220, then marked up by 25% to 40% to cover the benefits and risks you give up. So a £60,000 salary roughly equates to a £340 to £380 day rate before any markup, and £425 to £530 after it.
Try the calculator with your own numbers. If the take-home pay is only a little above the salary you would accept as an employee, the contract may not be worth the extra risk. If it is far above, the contract is paying you properly for it.
Inside IR35 vs outside IR35 — why this calculator shows the employed figure
IR35 is the UK off-payroll working rule. If your contract is inside IR35, you are taxed like an employee: income tax and National Insurance come off your pay, and this calculator’s figure is the right one. If your contract is outside IR35 and you work through your own limited company, the maths is completely different: the company pays Corporation Tax on its profit, and you take money out as a small salary plus dividends, which are taxed at dividend rates. An outside-IR35 contractor on the same £88,000 can keep noticeably more than £58,957.40 — but also carries the company’s admin, accountancy costs and the risk that HMRC disagrees with the status.
Never assume a contract is outside IR35 because the agency or client says so. The status depends on how you actually work — control, substitution and mutuality of obligation — and getting it wrong can mean a large backdated tax bill. If you are unsure, get the status checked before you sign.
What this calculator does not include
- Student loan repayments — Plan 2 is 9% of earnings above £29,385 a year. On £88,000 that is about £5,275 a year, which would cut take-home pay to about £53,682.
- Expenses — as a sole trader you deduct allowable business expenses before tax; as an employee or inside-IR35 contractor you generally cannot. See our expense tracking guide.
- Employer pension contributions — an employee’s headline salary does not include what the employer pays into their pension on top. A contractor has to fund the whole pension themselves.
- VAT — if you are VAT-registered, VAT is charged on top of your day rate and passed to HMRC; it is not part of your take-home pay.
- Accountancy and insurance — a limited company typically costs £100 to £200 a month in accountancy and insurance. Budget for it separately.
How to set your day rate
There are three honest ways to arrive at a day rate, and they should all point to roughly the same number. First, the salary method: take the permanent salary you would accept for the same work, divide it by 220, and add 25% to 40% for the benefits you lose — paid holidays, sick pay, employer pension contributions and job security. A £55,000 salary divided by 220 is £250 a day; with a 30% markup that becomes £325 a day. Second, the market method: ask recruiters and other contractors what the same role pays through agencies right now, and price yourself in the middle of that range unless you have a skill that is genuinely scarce. Third, the costs method: add up what you need — your target take-home pay, plus tax, pension, accountancy, insurance, unpaid holidays and gaps between contracts — and work backwards through this calculator until the day rate produces it.
If the three methods disagree wildly, trust the market method most: it is the only one that reflects what clients will actually pay. But never accept a rate below the costs method — that is the rate at which the contract leaves you worse off than the job you left. And remember that the rate is negotiable in both directions: a three-month contract at a high rate with a gap afterwards can be worth less than a twelve-month contract at a slightly lower rate with no gap. Finally, put the rate in writing before you start, including what counts as a day, how overtime is handled, and the notice period. A rate agreed by email is worth far more than a rate agreed on a phone call.
Related: IR35 Calculator · Take Home Pay Calculator · Freelancer Expense Tracking
Sources: GOV.UK “Income Tax rates and Personal Allowances”; HMRC “Rates and thresholds for employers 2026 to 2027” (Class 1 National Insurance); GOV.UK off-payroll working (IR35) guidance. Checked 13 November 2026.