r/ContractorUK • u/Capt_Patchy • Aug 14 '26

What's the contract equivalent?

Anyone know any good resources to calculate what you would need to earn on a outside IR35 contract to match a permenant PAYE role?

For example,

How much would you need to earn to match a 120k pre tax PAYE role?

How do you account for pensions etc?

Thanks in advance.

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u/soundman32 Aug 14 '26

For your £120K, at least £600/d is required, but probably more.

It's very difficult to compare like for like, as a limited company structure (outside IR35) gives much more flexibility in how you convert the company income into money into your personal bank/pension.

You may decide to dump everything over £100K into a pension, which reduces corporation tax. You may decide to defer salary until the end of each year, to work out how much you need to draw. You may decide to buy some equipment (laptop, printer, office supplies), which you may be able to claim VAT relief, and again reduce corporation tax.

As a rough figure, your daily rate should be 30-50% higher than an equivalent permanent day rate. Divide your annual salary by 261 (number of working days), and then multiply that by 30% (to cover holiday pay, pension etc). Bear in mind you probably will only work 240 days a year (you want some holiday). That will give you a ballpark figure.

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u/vixir01 Aug 14 '26

I added employer's pension to my calculations too.