On £150/day (220 days, £33,000/year revenue), a limited company contractor takes home £2,055/month. Through umbrella, the same rate produces £1,976/month. The £79/month gap is the smallest in the contractor day rate series — at this income level, most income falls in the basic rate band regardless of structure.
Take-Home Comparison — £150/Day
| Ltd Company | Umbrella | PAYE | |
|---|---|---|---|
| Annual revenue | £33,000 | £33,000 | £33,000 |
| Structure costs | £3,000 (expenses) + £1,136 employer NI | £1,500 margin | — |
| Gross personal income | £12,570 salary + £13,198 dividends | £28,043 salary | £29,348 salary |
| Income tax | £0 salary; £1,111 dividend tax | £3,095 | £3,356 |
| National Insurance | £0 (employee) | £1,238 | £1,342 |
| Monthly take-home | £2,055 | £1,976 | £2,054 |
| Annual take-home | £24,657 | £23,710 | £24,650 |
Ltd Company Calculation (Outside IR35)
Annual revenue: £33,000
- Director salary: −£12,570
- Employer NI (15% above £5,000): −£1,136
- Ltd expenses (accountant, insurance): −£3,000
- Taxable profit: £16,294
Corporation tax (19%): £3,096 Profit after CT: £13,198
Dividends:
- First £500: 0% (dividend allowance) = £0
- Remaining £12,698 at 8.75% = £1,111
- Net dividends: £12,087
Take-home: £12,570 (salary) + £12,087 (net dividends) = £24,657/year = £2,055/month
Umbrella Company Calculation (Inside IR35)
Revenue available after umbrella margin (£1,500): £31,500 Gross PAYE salary (after employer NI at 15% above £5,000):
- (£31,500 + £750) ÷ 1.15 = £28,043
| Deduction | Amount |
|---|---|
| Income tax (20% above £12,570) | £3,095 |
| Employee NI (8% above £12,570) | £1,238 |
| Net take-home | £23,710/year = £1,976/month |
PAYE Calculation
As a PAYE contractor (full day rate, no intermediary margin): Gross salary: (£33,000 + £750) ÷ 1.15 = £29,348
- Income tax: £3,356
- Employee NI: £1,342
- Take-home: £24,650/year = £2,054/month
Is Ltd Worth It at £150/Day?
Annual take-home gain: £947 (Ltd vs umbrella) Annual accountancy cost: £800–£1,500
At this rate, the financial case for Ltd is marginal. Most contractors running their own company at £150/day do so because:
- They have mixed income (some contracts at higher rates)
- They’re building retained profit for a higher-earning period
- Their accountant fees are on the lower end
If this is your only or primary contract rate, umbrella is likely simpler and the cost difference is small.
Worked Example — Pete, Junior IT Support Contractor
Pete charges £150/day as a junior IT support contractor through a local umbrella company. 220 days at £150 = £33,000 annual revenue.
Monthly payslip from umbrella:
- Assignment rate: £2,750
- Umbrella margin: −£125
- Employer NI: −£269
- Gross salary: £2,337
- Income tax (PAYE): −£258
- Employee NI: −£103
- Net take-home: £1,976
If Pete converts to Ltd company next year with a £150/day rate, he gains ~£79/month (£948/year) but takes on admin responsibility. At £200/day+, the case becomes significantly stronger.
Accounting and Admin Costs at £150/Day
Running a limited company adds recurring costs that reduce the attractiveness of the Ltd structure at lower day rates:
| Cost | Annual amount (approximate) |
|---|---|
| Accountant (Ltd company) | £1,200–£2,400 |
| Registered office address | £100–£300 |
| Companies House filing | Included with accountant |
| Business bank account | £0–£180 |
| Professional indemnity insurance | £300–£600 |
| Total overhead | ~£1,600–£3,480/year |
At 220 working days at £150/day, annual revenue is £33,000. Overhead of £2,000/year represents around 6% of gross revenue — which, combined with lower day rate savings and potentially limited IR35 flexibility, often makes the umbrella or PAYE route simpler and more cost-effective at this rate.