At £450/day (220 days, £99,000/year revenue), a limited company contractor takes home £5,383/month — £374/month (£4,488/year) more than umbrella. At this revenue level, your limited company crosses the VAT registration threshold of £90,000 — a key administrative milestone that changes how you invoice.
Take-Home Comparison — £450/Day
| Ltd Company | Umbrella | PAYE | |
|---|---|---|---|
| Annual revenue | £99,000 | £99,000 | £99,000 |
| Gross personal income | £12,570 salary + £64,236 dividends | £85,435 salary | £86,739 salary |
| Income tax | £0 salary; £12,211 dividend tax | £21,606 | £22,128 |
| National Insurance | £0 (employee) | £3,719 | £3,745 |
| Monthly take-home | £5,383 | £5,009 | £5,072 |
| Annual take-home | £64,595 | £60,110 | £60,866 |
Ltd Company Calculation (Outside IR35)
Annual revenue: £99,000
- Director salary: −£12,570
- Employer NI: −£1,136
- Ltd expenses: −£3,000
- Taxable profit: £82,294
Corporation tax (marginal relief): CT = 25% × £82,294 − (£250,000 − £82,294) × 3/200 = £20,574 − £2,516 = £18,058 (effective rate: ~21.9%)
Profit after CT: £64,236
Dividends:
- £500 at 0% = £0
- £37,200 at 8.75% = £3,255
- £26,536 (above £50,270 total income) at 33.75% = £8,956
- Total dividend tax: £12,211
Take-home: £12,570 + £64,236 − £12,211 = £64,595/year = £5,383/month
Umbrella Company Calculation (Inside IR35)
Revenue after umbrella margin: £97,500 Gross salary: (£97,500 + £750) ÷ 1.15 = £85,435
| Earnings | Rate | Tax |
|---|---|---|
| £12,571–£50,270 | 20% | £7,540 |
| £50,271–£85,435 | 40% | £14,066 |
| Total income tax | £21,606 |
Employee NI: (£37,700 × 8%) + (£35,165 × 2%) = £3,016 + £703 = £3,719
Take-home: £85,435 − £21,606 − £3,719 = £60,110/year = £5,009/month
PAYE Calculation
Gross salary: (£99,000 + £750) ÷ 1.15 = £86,739
- Income tax: £22,128
- Employee NI: £3,745
- Take-home: £60,866/year = £5,072/month
VAT Registration — Key Consideration at £450/Day
Annual revenue of £99,000 exceeds the £90,000 VAT registration threshold. Your limited company must be VAT-registered. Key points:
- Standard rate (20%): Add VAT to all invoices to UK clients. Most business clients are VAT-registered and reclaim it — so it doesn’t affect your rate.
- Flat Rate Scheme: Available if taxable turnover ≤ £150,000. You charge 20% VAT but pay a flat rate (typically 14–16% for IT/consulting), keeping the difference as profit. For most contractors, Flat Rate Scheme is marginally beneficial.
- VAT returns: Quarterly via Making Tax Digital (MTD) software. Your accountant should handle this within their fee.
If operating inside IR35 through umbrella, the umbrella handles all VAT — you don’t need to register.
Pension Strategy at £450/Day
At £450/day, £26,536 of dividends fall in the higher rate band (33.75%). Company pension contributions remove this exposure efficiently:
| Annual pension | Personal income | Dividend higher rate saving | CT saving | Net pension cost |
|---|---|---|---|---|
| £10,000 | £66,806 | £2,500 | £2,190 | £5,310 |
| £26,536 | £49,670 | Full removal: £6,634 | £5,811 | £14,091 |
A £26,536/year company pension contribution (£2,211/month) eliminates all higher rate dividend exposure and attracts £5,811 in CT relief — a net cost of £14,091 for £26,536 of pension saving.
Worked Example — Michael, Senior Infrastructure Architect
Michael contracts at £450/day (outside IR35) as a senior infrastructure architect. Annual revenue: £99,000. VAT-registered under the Flat Rate Scheme (14% rate).
VAT benefit: Charges 20% VAT, pays 14% flat rate → retains 6% = £99,000 × 6% = £5,940 additional annual income (not subject to CT as it’s VAT retained; enters profit pre-CT).
Company accounts (excluding VAT benefit for clarity):
- Revenue: £99,000
- Salary + employer NI: £13,706
- Expenses: £3,000
- Company pension: £15,000
- Pre-CT profit: £67,294
- CT (effective ~21.4%): £14,381
- Available for dividends: £52,913
Michael’s personal income:
- Salary: £12,570
- Dividends: £52,913 (higher rate exposure: £15,213 at 33.75% = £5,134; total div tax: £8,390)
- Monthly take-home: £4,759 (significantly boosted by £15,000 pension accumulation)