On £250/day (220 days, £55,000/year revenue), a limited company contractor takes home £3,410/month. Umbrella produces £3,124/month. The £286/month advantage of Ltd — £3,432/year — makes this the rate at which the financial case for running your own company becomes compelling.
Take-Home Comparison — £250/Day
| Ltd Company | Umbrella | PAYE | |
|---|---|---|---|
| Annual revenue | £55,000 | £55,000 | £55,000 |
| Gross personal income | £12,570 salary + £31,018 dividends | £47,174 salary | £48,478 salary |
| Income tax | £0 salary; £2,670 dividend tax | £6,921 | £7,182 |
| National Insurance | £0 (employee) | £2,768 | £2,873 |
| Monthly take-home | £3,410 | £3,124 | £3,202 |
| Annual take-home | £40,918 | £37,485 | £38,423 |
Ltd Company Calculation (Outside IR35)
Annual revenue: £55,000
- Director salary: −£12,570
- Employer NI (15% above £5,000): −£1,136
- Ltd expenses: −£3,000
- Taxable profit: £38,294
Corporation tax (19%): £7,276 Profit after CT: £31,018
Dividends (all within basic rate band):
- First £500 at 0% = £0
- Remaining £30,518 at 8.75% = £2,670
- Net dividends: £28,348
Take-home: £12,570 + £28,348 = £40,918/year = £3,410/month
Note: total personal income (£12,570 + £31,018 = £43,588) remains below the £50,270 higher rate threshold — all dividends at basic rate.
Umbrella Company Calculation (Inside IR35)
Revenue after umbrella margin: £53,500 Gross salary: (£53,500 + £750) ÷ 1.15 = £47,174
| Deduction | Amount |
|---|---|
| Income tax (20% above £12,570) | £6,921 |
| Employee NI (8% above £12,570) | £2,768 |
| Net take-home | £37,485/year = £3,124/month |
PAYE Calculation
Gross salary: (£55,000 + £750) ÷ 1.15 = £48,478
- Income tax: £7,182
- Employee NI: £2,873
- Take-home: £38,423/year = £3,202/month
Is Ltd Worth It at £250/Day?
Annual take-home gain: £3,433 (Ltd vs umbrella)
With accountancy at ~£1,000–£1,200/year, you’re £2,200–£2,400/year ahead through Ltd. The admin overhead — quarterly VAT returns, confirmation statements, annual accounts — takes perhaps 2–4 hours per month with a good accountant handling the heavy lifting.
At £250/day, most contractors operating for 12+ months through Ltd will be significantly better off. The only scenario where umbrella wins is if you’re on a short contract (under 3 months) where setup time and cost aren’t worthwhile.
The 19% CT Rate Advantage at £250/Day
Company profit at £250/day is £38,294 — below the £50,000 small profits rate threshold. This means you pay the lowest corporation tax rate of 19%, then take dividends at 8.75% (basic rate) — the most efficient combination in the Ltd contractor model.
Once revenue exceeds roughly £70,000–£80,000 (around £320–£360/day), marginal relief CT rates apply. 19% CT is one of the key attractions of the £200–£300/day range for Ltd contractors.
Worked Example — James, Project Coordinator
James is a project coordinator contracting at £250/day (outside IR35) in the manufacturing sector through his limited company.
Quarterly snapshot (55 days at £250/day):
- Revenue: £13,750
- Salary drawn: £3,143 (quarterly portion of £12,570)
- Employer NI: £284
- Quarterly take-home: £13,750 − £3,427 (costs) − £1,906 (CT) = quarterly profit retained + salary drawn ≈ £10,250
Annually:
- Salary: £12,570
- Net dividends: £28,348
- Monthly take-home: £3,410
His umbrella-using colleague at the same rate takes home £3,124/month. James is £3,432/year ahead — enough to pay his accountant and fund a significant pension contribution.
IR35 Risk at £250/Day
At £250/day, many contractors work in roles where IR35 determination is critical. For medium or large private sector clients and all public sector clients, the end client determines IR35 status (from April 2021).
If you are inside IR35 at £250/day:
- Your Ltd company income is treated as deemed employment income
- PAYE tax and NI apply — effectively the same as umbrella, but with Ltd company admin costs still to pay
- Net take-home may be lower than umbrella due to overhead without benefit
If your contract is inside IR35 and your client insists on it, using an umbrella company directly is typically simpler and cleaner than a Ltd company deemed payment calculation.