What's My Take Home

Contractor Day Rate to Salary Calculator

2026/27

Enter your day rate and working days to see the equivalent permanent salary, income tax, National Insurance, and how much you actually take home. Includes employer cost comparison.

Updated for the 2026/27 tax year · Last reviewed April 2026

How to Convert a Day Rate to an Annual Salary

The formula is straightforward: day rate × working days = annual equivalent. The key variable is how many days you actually bill in a year. Most contractors use 220 days as a conservative baseline, though this can range from 180 (frequent downtime) to 240 (minimal holiday).

Once you have the annual gross figure, you can run it through a PAYE calculator (exactly as this tool does) to find your take-home pay. The tax calculation is identical to a permanent employee on the same salary, assuming a standard 1257L tax code for 2026/27.

Remember that the gross day-rate salary is not the same as the equivalent permanent package. A permanent employee on the same gross salary also receives paid holiday, employer pension contributions, sick pay, and statutory benefits. Contractors must price these into their day rate or fund them separately.

How Many Working Days in a Year?

The right number depends on your contract pattern and holiday preferences. Use the table below to see how different assumptions affect your annual equivalent salary.

ScenarioWorking DaysAnnual Equivalent (£500/day)Notes
Minimal downtime240 days£120,000Little holiday, no gaps between contracts
Standard assumption220 days£110,00025 days holiday + 8 bank holidays + 7 sick/gap
With contract gaps200 days£100,000Accounts for 4–6 weeks without income
Part-time / 4-day week176 days£88,0004 days per week × 44 working weeks

Understanding the True Employer Cost

When a business hires a permanent employee, the gross salary is only part of what they pay. In 2026/27, employers pay 15% employer National Insurance on all earnings above £5,000. On top of this, most employers contribute to a workplace pension. The statutory minimum employer contribution is 3% under auto-enrolment.

For a permanent employee on £60,000 per year, the true cost to the employer is closer to £70,050 when you include employer NI and minimum pension. This is why contractors (who absorb all these costs themselves) can justify day rates that appear high compared to a permanent salary.

The employer cost comparison in this calculator shows the difference between paying your day rate directly and the equivalent all-in cost of a permanent employee. Understanding this gap is essential when negotiating day rates or deciding whether to go permanent.

Note that contractor costs are typically invoiced through a limited company or umbrella company. Whether you can benefit from the limited company structure depends on your IR35 status . Umbrella companies add their own margin and handle PAYE on your behalf, so your actual take-home will be slightly lower than the figures shown here due to their fee.

Tax Bands Applying to Contractor Day Rates in 2026/27

Regardless of how you structure your contracting, income above the personal allowance is subject to income tax at the same bands as a permanent employee. The rates below apply to the PAYE equivalent shown in this calculator.

Income BandIncome Tax RateEmployee NI RateCombined
Up to £12,5700%0%0%
£12,570 – £50,27020%8%28.000000000000004%
£50,270 – £100,00040%2%42.00000000000001%
£100,000 – £125,14060% (effective, PA taper)2%62% (effective)
Over £125,14045%2%47%

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Frequently Asked Questions

How do I convert a day rate to an annual salary?
Multiply your day rate by the number of days you work per year. A common assumption is 220 days (260 weekdays minus 25 days holiday, 8 bank holidays, and 7 sick days). For example, a £500/day contractor working 220 days earns a gross equivalent of £110,000 per year. However, unlike a permanent salary, this gross figure must also cover your own employer-equivalent costs such as periods without work, accountancy fees, and insurance.
Why is 220 days used as the standard working year?
220 days is the most commonly cited working year for UK contractors. It starts from 260 possible weekdays in a year, then deducts 25 days of holiday (the UK statutory minimum for permanent employees), 8 UK bank holidays, and approximately 7 days of sickness or downtime. Some contractors use 230 or 240 days if they take less holiday, while others use as few as 200 days to account for gaps between contracts.
Do contractors pay the same tax as permanent employees?
It depends on the engagement. If you operate outside IR35 through a limited company, you can draw a combination of salary and dividends, which is typically more tax-efficient. If you are inside IR35, the fee-payer must deduct PAYE income tax and employee National Insurance as if you were a direct employee. This calculator shows the PAYE position. Use our Salary vs Dividends calculator for the limited company scenario.
What is employer NI and why does it matter for contractors?
Employer National Insurance is a cost paid by the business hiring you, on top of your gross salary. In 2026/27 the rate is 15% on earnings above £5,000 per year. A permanent employee on £60,000 costs their employer roughly £8,250 in employer NI alone. As a contractor, your client pays none of this on your day rate, which is part of why day rates appear higher than equivalent permanent salaries.
Should I compare my day rate to a gross or net salary?
Always compare gross to gross. A permanent employee quoted a £60,000 salary takes home significantly less after tax. When comparing your day rate to a permanent role offer, convert both to gross annual figures, then use a take-home calculator to see what each actually pays you month to month. Don't forget to factor in permanent employee benefits (pension matching, paid holiday, sick pay, private healthcare) which contractors must fund themselves.
How does pension affect a contractor's take-home pay?
If you contribute to a pension through your limited company or SIPP, contributions reduce your taxable income. The pension percentage input in this calculator reduces your taxable salary in the same way as an employee pension (non-salary sacrifice). Paying into a pension is particularly valuable for contractors earning above £100,000, where it can restore the personal allowance that tapers away above that threshold and avoid the 60% effective marginal tax rate.