2025/26 Tax Year

Take home pay calculator: limited company vs self-employed

Enter a day rate or annual income and see exactly what lands in your account each month as a limited company director versus a sole trader. Income tax, NI, dividend tax and corporation tax — all broken down for the current UK tax year.

Use the calculator How it works

Live calculator Tax year 2025/26

Day rate

£/day

Billable days / year

days

Allowable expenses

£/yr

Pension contribution

£/yr

IR35 status (Ltd path only)

Your estimated take-home

BestLtd Company£0£0/month

BestSole Trader£0£0/month

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Line	Ltd	Sole

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Key takeaways

Ltd company directors typically take home more than sole traders above roughly £40,000 of profit, thanks to dividend tax rates and the £500 dividend allowance.
Self-employment is simpler and cheaper below that threshold — no corporation tax, no payroll, and fewer filing deadlines.
2025/26 rates matter: Employee NI sits at 8% and 2%, employer NI jumps to 15% above £5,000, and small profits corporation tax is 19% up to £50,000 of profit.
The £500 dividend allowance is a fraction of what it was in 2022 — model this carefully before choosing a company structure.
IR35 status changes everything. If you're caught inside IR35, the Ltd tax advantage largely disappears.

How it works

Three inputs, one clear answer

Enter your income

Plug in a day rate or annual salary. Add allowable expenses and pension contributions.

We run both tax paths

We apply 2025/26 income tax, Class 4 NI, dividend tax, corporation tax, employer NI and the Employment Allowance.

See your take-home, compared

Monthly and annual net pay for both structures, every tax line broken out.

Take-home pay, simply explained

Your take-home pay is what lands in your personal bank account after tax and National Insurance. For UK contractors, freelancers and directors, that number depends almost entirely on two choices: the structure you trade through (limited company or sole trader) and how you draw money out (salary, dividends or a mix).

Limited company vs self-employed: the short version

If you're profitable and earning above the basic rate threshold, a limited company almost always produces more take-home pay. Below that, the admin and accountancy cost of running a company often eats the saving.

Consideration	Limited company	Sole trader
Tax on profits	Corporation tax 19–25%	Income tax 20/40/45%
NI	Employer NI 15% on salary above £5k	Class 4 NI 6% / 2%
Dividend tax	8.75% / 33.75% / 39.35%	N/A
Setup & admin	Companies House, payroll, CT return	Self Assessment only

Common mistakes to avoid

Forgetting IR35. Inside IR35, the fee-payer deducts tax at source and almost all Ltd tax-efficiency is lost.
Ignoring employer NI. Full-time director salary triggers 15% employer NI.

Who it's for

Made for UK self-employed workers

Contractors

Day-rate contractors working outside IR35 deciding whether to form a limited company.

Contractor accountants →

Freelancers

Designers, developers and consultants wondering if limited is worth the admin at their income level.

Freelancer accountants →

Limited company directors

Existing directors checking whether their current salary/dividend split is still optimal for 2025/26.

Limited company guide →

Sole traders

Sole traders who have crossed £50k of profit and want to know if incorporating is worth it.

Sole trader accountants →

Questions answered

Frequently asked questions

How do you calculate take home pay in the UK?

Take home pay is gross income minus income tax, National Insurance and any other statutory deductions. For a limited company director the calculation runs corporation tax first on company profit, then dividend tax on what you draw personally. For a sole trader, income tax and Class 4 NI are applied to profits after allowable expenses.

Is a limited company more tax efficient than self-employment?

Usually yes, above roughly £40,000 to £50,000 of profit. A limited company pays corporation tax at 19% on the first £50k, then dividends are taxed at 8.75%, 33.75% or 39.35% depending on your band. A sole trader pays 20, 40 or 45% income tax plus 6 or 2% Class 4 NI on everything above the personal allowance.

What is the personal allowance for 2025/26?

The personal allowance is £12,570 for 2025/26, frozen since 2021/22. It tapers by £1 for every £2 of income above £100,000 and disappears entirely at £125,140. Salary within the personal allowance is effectively tax-free for income tax, which is why it is a common director salary level.

Does this calculator account for IR35?

No, this calculator assumes your contracts are outside IR35. If you are caught inside IR35 the fee-payer deducts tax at source and most of the limited company tax efficiency disappears. For IR35-aware modelling use our outside IR35 contractor calculator instead, which factors in deemed employment payments and PAYE deductions.

What is the optimal salary for a director in 2025/26?

For most single-director companies a salary of £12,570 is optimal where the £10,500 Employment Allowance applies. For solo directors without other staff, £5,000, the National Insurance secondary threshold, is often the better figure because it avoids employer NI entirely. The remainder is drawn as dividends up to the £500 allowance then taxed at 8.75% or higher.

What is the dividend allowance for 2025/26?

The dividend allowance is £500, cut progressively from £5,000 in 2017/18 to £500 from 2024/25 onwards. Dividends up to this amount are tax-free. Above it, dividends are taxed at 8.75% in the basic rate band, 33.75% in the higher rate band and 39.35% in the additional rate band, stacked on top of any salary you draw.