Contractor Day Rate Calculator

Contractor day rates are the standard pricing unit in the UK contracting market. To convert a permanent salary to an equivalent day rate, the calculator divides the annual salary by the number of billable working days (typically 220-230 after deducting holidays, bank holidays and an allowance for bench time), then adds a premium to cover the loss of benefits and job security.

A common rule of thumb is to divide the salary by 1,000 for a basic day rate equivalent (e.g. £60,000 salary = £300/day). However, this does not account for employer NI savings, pension, sick pay, holiday pay and other benefits that contractors must fund themselves. A more accurate conversion adds 20-40% to cover these.

This calculator converts between salary and day rate in both directions. It includes options for operating through a limited company, umbrella company or PAYE agency, showing the take-home pay under each model. Enter either a salary or a day rate and see the equivalent under all three structures.

Day rate vs permanent salary — how to compare. Equivalent annual: day rate × 220 (typical UK working days/year for contractors). £400/day = £88,000 gross. Permanent equivalent (after tax and benefits): typically £55,000-£65,000 salary depending on pension/benefits. Contractor downsides: no paid holiday, no sick pay, no pension contributions, no medical insurance, no employer NI. Add 25-35% premium to perm equivalent for true comparison. Sample: £55k perm with 6% pension + benefits ≈ £75-£80k contractor income.

Inside IR35 vs outside IR35 — huge tax difference. Outside IR35: pay as limited company — low salary + dividends — typical effective tax rate 28-35% on £80k income. Inside IR35: pay as employee equivalent — PAYE + NI + employer NI all deducted at source — typical effective tax rate 40-48% on same income. Sample £80,000 contract: outside IR35 net £52-£56k; inside IR35 net £42-£46k = £10k+ difference. Since April 2021: medium/large clients determine IR35 status. Small clients (<£10.2M turnover): contractor decides.

Costs of contracting — often overlooked. Limited company setup: £200-£500 (or £12 DIY at Companies House). Accountant: £100-£200/month (£1,200-£2,400/year). Insurance: Professional Indemnity (£60-£200/year), Public Liability (£50-£150), IR35 enquiry insurance (£200-£400). Pension contributions: 100% your responsibility (none from employer). Holiday: take unpaid; budget ~20 days × day rate = £8,000-£15,000 'opportunity cost'. Total operating costs: typically 5-8% of revenue.

Realistic UK contractor day rates 2026. IT contractor (Java, .NET, DevOps mid-level): £400-£700/day outside IR35. Project manager (PMP): £450-£800. Management consultant (Big 4 alumni): £600-£1,500. Senior architect: £800-£1,500. Locum doctor (specialty): £80-£140/hour. Lawyer (consulting): £500-£2,000+. Day rates dropped 10-20% 2022-2025 due to IR35 changes pushing many roles inside (which most contractors accept rather than walk away). Always check: inside or outside, expenses paid (often not), location (London 30-50% premium).

When contracting beats employment. Higher take-home (outside IR35): typically 15-30% more than equivalent salary. Variety: project hops keep skills fresh, broader experience. Tax efficiency (outside IR35): pension contributions, salary sacrifice, expenses, business asset purchases. Flexibility: take time off between contracts, work from home freely, choose clients. Downsides: no job security, no employer pension, no sick pay, no employment rights, dual relationships hard. Best contractor pattern: 80% utilisation rate (44 weeks worked, 8 unpaid), 6-month emergency fund, IR35-aware role selection.