Answers · UK 2025/26

What is the take-home pay on a £500/day contractor rate?

A contractor on £500/day outside IR35 (220 working days/year = £110,000 gross) takes home approximately £73,500/year after Corporation Tax (19/25%), salary, dividends and basic admin. Inside IR35 the same gross drops to approximately £62,500.

Last updated: 6 April 2025Last reviewed: 6 April 2025How we verify

Full answer

For a UK limited-company contractor on £500/day (220 working days = £110,000/year gross billed, outside IR35): take a small salary at the NI threshold (£12,570), reducing Corporation Tax. Profit after salary: £97,430. Corporation Tax at the marginal rate (£50k–£250k band, ~26.5% effective) ≈ £25,820. Distributable profit: £71,610. Dividend tax: first £500 free, then £500-£37,200 at 8.75% = £3,212, balance ~£34,910 at 33.75% = £11,782. Plus £0 income tax on £12,570 salary (PA covered). Total take-home: approximately £73,500 (excludes any expenses, employer pension, mileage). Inside IR35: full £110,000 taxed as employment income, employer NI 15% deducted first → reducing taxable to ~£95,650, then PAYE 20%/40% Income Tax + 8%/2% employee NI = roughly £62,500 net. Difference: ~£11,000/year. Always model your specific costs — Corporation Tax rate, expenses, pension can shift outcome by £5–10k.