At £350/day (£77,000/year revenue), the limited company route produces £4,490/month — £406/month (£4,872/year) more than umbrella. At this rate, company profit crosses £50,000 and marginal CT relief begins to apply, but the Ltd tax advantage over PAYE remains substantial.
Take-Home Comparison — £350/Day
| Ltd Company | Umbrella | PAYE | |
|---|---|---|---|
| Annual revenue | £77,000 | £77,000 | £77,000 |
| Gross personal income | £12,570 salary + £48,066 dividends | £66,304 salary | £67,609 salary |
| Income tax | £0 salary; £6,753 dividend tax | £13,954 | £14,476 |
| National Insurance | £0 (employee) | £3,337 | £3,363 |
| Monthly take-home | £4,490 | £4,084 | £4,148 |
| Annual take-home | £53,883 | £49,013 | £49,770 |
Ltd Company Calculation (Outside IR35)
Annual revenue: £77,000
- Director salary: −£12,570
- Employer NI: −£1,136
- Ltd expenses: −£3,000
- Taxable profit: £60,294
Corporation tax (marginal relief applies): CT = 25% × £60,294 − (£250,000 − £60,294) × 3/200 = £15,074 − £2,846 = £12,228 (effective rate: ~20.3%)
Profit after CT: £48,066
Dividends:
- £500 at 0% = £0
- £37,200 (basic rate room) at 8.75% = £3,255
- £10,366 (above £50,270 total income) at 33.75% = £3,498
- Total dividend tax: £6,753
Take-home: £12,570 + £48,066 − £6,753 = £53,883/year = £4,490/month
Umbrella Company Calculation (Inside IR35)
Revenue after umbrella margin: £75,500 Gross salary: (£75,500 + £750) ÷ 1.15 = £66,304
| Earnings | Rate | Tax |
|---|---|---|
| £12,571–£50,270 | 20% | £7,540 |
| £50,271–£66,304 | 40% | £6,414 |
| Total income tax | £13,954 |
Employee NI: (£37,700 × 8%) + (£16,034 × 2%) = £3,016 + £321 = £3,337
Take-home: £66,304 − £13,954 − £3,337 = £49,013/year = £4,084/month
PAYE Calculation
Gross salary: (£77,000 + £750) ÷ 1.15 = £67,609
- Income tax: £14,476 (£7,540 basic + £6,936 higher rate)
- Employee NI: £3,363
- Take-home: £49,770/year = £4,148/month
Corporation Tax Marginal Relief — How It Works at £350/Day
For company profits between £50,000 and £250,000, HMRC applies marginal relief. The formula:
CT = 25% × profit − (£250,000 − profit) × 3/200
At £60,294 profit: CT = £15,074 − £2,846 = £12,228 (effective rate: 20.3%)
As day rate and profit increase, the effective CT rate rises toward 25%:
| Day rate | Profit | Effective CT | CT rate |
|---|---|---|---|
| £300 | £49,294 | £9,366 | 19.0% |
| £350 | £60,294 | £12,228 | 20.3% |
| £400 | £71,294 | £15,143 | 21.2% |
| £500 | £93,294 | £20,973 | 22.5% |
Pension Strategy at £350/Day
The most tax-efficient move at £350/day is a company pension contribution of ~£10,366 to bring personal income back to £50,270:
| Scenario | Take-home | Pension saving | Net benefit |
|---|---|---|---|
| No pension | £53,883/year | — | — |
| £10,366 company pension | £50,996/year | £10,366 | £3,253 net pension cost; saves £2,887 div tax |
The company saves ~20.3% CT on the contribution: £2,104. Net pension cost: £8,262. This funds retirement while removing all dividend higher rate exposure.
Worked Example — Alex, Senior Data Engineer
Alex contracts at £350/day as a senior data engineer, outside IR35, through his limited company. Annual revenue: £77,000.
Company accounts:
- Revenue: £77,000
- Salary (incl. employer NI): £13,706
- Expenses: £3,000
- Pre-CT profit: £60,294
- CT (marginal relief): £12,228
- Available for dividends: £48,066
Alex’s personal take-home:
- Salary: £12,570/year
- Dividends: £48,066 gross; dividend tax: £6,753
- Monthly take-home: £4,490
His umbrella-using colleague takes home £4,084/month — £406 less. After paying £1,200/year accountancy fees, Alex is £3,672/year ahead.