Contractor vs Permanent

Contractor vs Permanent: Making the Right Choice

The decision to go contracting or stay in permanent employment is one of the biggest career choices you can make. While the financial comparison is important, it is only part of the picture. This calculator helps you understand the numbers so you can make an informed decision.

Contracting through a limited company is the most tax-efficient structure for most contractors working outside IR35. By paying yourself a small salary (typically at the personal allowance threshold of £12,570) and taking the remainder as dividends, you benefit from lower tax rates on dividend income compared to employment income. Corporation tax is paid on company profits before dividends are distributed.

However, contractors must factor in the value of benefits they lose. Paid holiday alone can be worth several thousand pounds per year. Employer pension contributions, sick pay, maternity or paternity pay, and redundancy protection all have real financial value. There is also the risk of gaps between contracts, which this calculator accounts for through the working weeks input.

For a more detailed look at your take-home pay in either scenario, try our Take-Home Pay Calculator. If you are comparing specific job offers, our Which Job Should I Pick? calculator lets you factor in commute costs and remote working too.