Contractor vs Permanent Calculator (Contract to Perm)

How the contract to perm calculation works

A permanent employee is paid for 260 working days a year (52 weeks × 5), including holiday and bank holidays. A contractor is paid only for the days they bill. The calculator starts from 260 and takes off holiday, bank holidays, bench time between contracts and sick or training days. With 25 days’ holiday, 8 bank holidays, 2 bench weeks and 3 sick days you bill 214 days.

It then works out take-home pay inside IR35 through an umbrella company and outside IR35 through your own limited company, and finds the permanent salary that would leave you as well off. A perm job’s employer pension counts at face value, so with a 5% employer contribution the equivalent salary is lower than a pure take-home match.

Day rate to equivalent salary

The table uses 214 billable days, a £25 a week umbrella margin, the Apprenticeship Levy, £2,500 a year of limited company costs, a director’s salary of £12,570 and a 5% employer pension in the permanent job, for someone in England in 2026/27.

At £500 a day, inside IR35 leaves £64,128 a year (£299.66 per day billed), which matches a £85,033 permanent salary. Outside IR35 the same rate leaves £67,335, worth £90,123 as a salary. Eight weeks on the bench instead of two cuts outside-IR35 take-home to £60,251, which is why bench time matters more than small differences in umbrella margin.

Perm to contract: the day rate you need

Going the other way, the calculator finds the day rate at which contracting matches a permanent salary plus its employer pension. The common rule of thumb, salary ÷ 220 × 1.3, is shown for comparison. It lands close to the inside-IR35 break-even, where employer NI and the umbrella margin come out of your rate, and above the outside-IR35 break-even, so it only builds in a safety margin for work outside IR35.

Inside IR35: umbrella company pay

Inside IR35 you are taxed like an employee. An umbrella company receives your day rate, deducts employer National Insurance at 15% above £5,000, the 0.5% Apprenticeship Levy if its pay bill is over £3 million, and its margin, and pays the rest to you through PAYE. That is why umbrella take-home is often 55% to 65% of the assignment rate.

Travel and subsistence relief for travel to a workplace is generally not available when you are under the supervision, direction or control of the client, which most inside-IR35 roles are. Since 6 April 2026 the recruitment agency, or the end client if there is no agency, is responsible for making sure PAYE is run correctly on umbrella pay, and HMRC can recover unpaid tax from them.

Outside IR35: limited company pay

Outside IR35 your company invoices the client, pays corporation tax on its profit (19% up to £50,000, 25% above £250,000, with marginal relief in between) and pays you a small salary plus dividends. Dividends are taxed at 10.75%, 35.75% and 39.35% from April 2026, after a £500 allowance.

A one-person company cannot claim the Employment Allowance, because its only employee paid above the secondary threshold is the director, so a £12,570 salary costs £1,136 in employer NI. Business costs such as accountancy, insurance and equipment reduce profit before corporation tax.

If your turnover goes over £90,000, the company must register for VAT. Most contractors are “limited cost businesses” under the Flat Rate Scheme and pay 16.5%, so the scheme gives little benefit. Compare the full picture in the limited company tax calculator.

Who decides IR35 status

If your client is a medium or large business, or a public body, it decides your status and must give you a Status Determination Statement with its reasons. A private-sector client is small, and exempt, if it meets two of these: turnover of £15 million or less, a balance sheet of £7.5 million or less, and 50 employees or fewer (thresholds for financial years starting on or after 6 April 2025). With a small client your own company decides. HMRC’s Check Employment Status for Tax (CEST) tool gives a view based on the contract and working practices.

What a permanent job is worth beyond the salary

• Paid holiday: at least 5.6 weeks (28 days for a 5-day week), and bank holidays if the contract gives them on top.
• Employer pension: at least 3% of qualifying earnings between £6,240 and £50,270; many employers pay 5% to 10% of salary.
• Sick pay, maternity and paternity pay, and redundancy pay after 2 years.
• No bench time, no business costs and no IR35 risk. Contractors usually ask for a premium on top of the break-even rate to cover these.