Umbrella vs limited company
The same day rate leaves you with different money under each route. This is how the numbers compare, and what else to weigh up before you choose.
Side by side.
Annual take-home at 5 days a week for 44 weeks, 2026/27 rates. Limited company outside IR35 assumes a £12,570 salary and the rest as dividends.
| Day rate | IR35 | Umbrella | Limited company | Difference |
|---|---|---|---|---|
| £350 | Outside | £49,115 63.8% | £53,498 69.5% | +£4,383 |
| £350 | Inside | £49,115 63.8% | £47,970 62.3% | -£1,144 |
| £500 | Outside | £65,758 59.8% | £69,082 62.8% | +£3,324 |
| £500 | Inside | £65,758 59.8% | £64,614 58.7% | -£1,144 |
| £650 | Outside | £77,628 54.3% | £82,410 57.6% | +£4,781 |
| £650 | Inside | £77,628 54.3% | £76,257 53.3% | -£1,371 |
Percentages show the share of the invoice you keep. An estimate, not advice.
When an umbrella tends to suit
- Your contract is inside IR35, where the tax result is similar either way.
- You want the simplest set-up and no company admin.
- The contract is short, or you move between agencies often.
When a limited company tends to suit
- Your contract is outside IR35 and likely to stay there.
- Your rate is high enough that the running costs are worth it.
- You are comfortable with company accounts, or happy to pay an accountant to handle them.
Umbrella rules changed in April 2026
From 6 April 2026, HMRC can pursue the recruitment agency, and in some cases the end client, for an umbrella company's unpaid PAYE and National Insurance. Contractors are not the main target, but agencies may tighten supplier lists and checks, which can slow down changing umbrella. Check that your umbrella is on your agency's approved list.
Estimates only, not financial or tax advice. Your own figures will differ.
Questions, answered.
Which is better, umbrella or limited company?
It depends on your IR35 status, rate, contract length and appetite for admin. Outside IR35 at a decent rate, a limited company often leaves more. Inside IR35, an umbrella is usually simpler and the difference is small.
What does a limited company cost to run?
Typically an accountant, business insurance, software and a business bank account. The comparison above assumes £1,800 a year in running costs. Your actual figure will vary.
Did umbrella company rules change in 2026?
Yes. From 6 April 2026, HMRC can recover unpaid PAYE and National Insurance from the recruitment agency or, in some cases, the end client, as well as from the umbrella company. Some agencies are tightening their supplier lists as a result.
Can I switch between the two?
Yes, but check your contract and agency requirements first. Many people switch when a contract moves inside or outside IR35, or when their income changes.
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