IR35 and contractors
Umbrella company calculator: from rate to take-home
The rate an agency quotes for an umbrella role is not your salary: the employer’s costs come out of it first.
An umbrella worker on £400 a day for 220 days in 2026/27 generates £88,000 of assignment income but takes home £54,663, 62.1 % of it, in England, Wales or Northern Ireland with no pension or student loan. Before any of your own tax, the umbrella keeps its margin (£920 at £20 a week for 46 weeks) and pays its employer costs out of the rate: £10,656 of employer National Insurance at 15 % and £380 of Apprenticeship Levy. That leaves gross pay of £76,043, from which PAYE takes £17,849 of Income Tax and £3,531 of employee National Insurance. All of this is lawful, and the agency must set out the deductions in a Key Information Document before you start. Since 6 April 2026 the agency, or the end client if there is no agency, is also liable for any PAYE the umbrella fails to pay.
Umbrella company take-home
Take-home for the year
£54,663
| Employer NI taken from the rate | £10,656 |
| Levy and margin | £1,300 |
| Gross pay | £76,043 |
| Income Tax and NI | £21,381 |
England, Wales or Northern Ireland rates, no pension or student loan.
Figures checked by Radif Partners · Editorial policy · How we calculate
The deductions, in order
| Line | Year |
|---|---|
| Assignment income | £88,000 |
| Umbrella margin | −£920 |
| Employer National Insurance | −£10,656 |
| Apprenticeship Levy | −£380 |
| Gross pay | £76,043 |
| Income Tax | −£17,849 |
| Employee National Insurance | −£3,531 |
| Take-home | £54,663 |
The first block belongs to the employer. The umbrella receives the assignment rate from the agency and pays its own costs from it, which is why employer National Insurance (15 % above £5,000 of gross pay) and the levy shrink the money before your salary is set. The second block is the employee’s: Income Tax and employee National Insurance at 8 % up to £50,270, then 2 %. A real pay statement may add holiday pay and pension lines, which this calculator leaves out.
Four rates compared
| Day rate | Assignment income | Gross pay | Take-home | Share kept |
|---|---|---|---|---|
| £250 | £55,000 | £47,472 | £37,699 | 68.5 % |
| £350 | £77,000 | £66,519 | £49,139 | 63.8 % |
| £500 | £110,000 | £95,091 | £65,710 | 59.7 % |
| £650 | £143,000 | £123,662 | £77,549 | 54.2 % |
The share kept falls as the rate rises, because higher gross pay moves into the 40 % band from £50,271, while employer National Insurance keeps taking the same percentage at every level.
The Apprenticeship Levy
The levy is 0.5 % of an employer’s pay bill, less an annual allowance of £15,000, so it only bites on large payrolls (HMRC rates for employers). An umbrella with a large enough pay bill owes it, and GOV.UK lists it among the deductions from the assignment rate, if applicable; the Key Information Document lists what will be deducted. Switch the levy option in the calculator to see the difference.
The Key Information Document
An agency that wants you to work through an umbrella, whether its preferred one or one you choose, must give you a Key Information Document before the assignment. It names the umbrella, the minimum assignment rate paid to it (also called the umbrella rate or uplifted rate), what it will deduct and your minimum gross pay (GOV.UK, working through an umbrella company). Keep it: when the first reconciliation statement arrives, each deduction should match.
PAYE rules from 6 April 2026
New rules took effect for money paid on or after 6 April 2026. The agency that contracts with the end client, or the end client if there is no agency, must make sure the umbrella operates PAYE correctly, and HMRC can recover any shortfall from it. The rules cover existing supply chains as well as new ones. They do not apply when the worker is engaged through their own personal service company and certain conditions are met, which the IR35 guide covers, nor to managed service companies, salaried members of an LLP or workers already treated as employed by an agency (HMRC, PAYE rules for supply chains with umbrella companies).
GOV.UK points to a separate payment described as not taxable, such as a loan; being paid more than your payslip shows; money from anyone other than the umbrella; a second agreement on top of your contract; and an employer name or PAYE reference that keeps changing. Check that the tax and National Insurance on your payslips appear in your personal tax account.
Comparing an umbrella with a contract run through your own company, inside or outside IR35, is the job of the IR35 calculator.