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What a UK salary is actually worth after income tax and National Insurance — yearly, monthly and weekly — what the same engagement pays permanent, inside IR35 and outside it, and what the next pound you earn is worth.
| Per period | Yearly | Monthly | Weekly |
|---|---|---|---|
| Gross | £110,000 | £9,167 | £2,115 |
| Income tax | −£33,432 | −£2,786 | −£643 |
| Employee NI | −£4,211 | −£351 | −£81 |
| Take-home | £72,357 | £6,030 | £1,391 |
01 · Permanent, inside IR35, outside IR35
The only fair way to compare these is at the same cost to the engager — the whole sum leaving their budget. A £110,000 salary costs £125,750 once employer NI is added, so that is the figure all three columns below are given to work with.
| £125,750 buys | Permanent | Inside IR35 | Outside IR35 |
|---|---|---|---|
| Employer NI | −£15,750 | −£15,750 | −£1,136 |
| Corporation tax | — | — | −£25,942 |
| Income tax | −£33,432 | −£33,432 | £0 |
| Employee NI | −£4,211 | −£4,211 | £0 |
| Dividend tax | — | — | −£21,303 |
| Take-home | £72,357 | £72,357 | £77,370 |
| You keep | 57.5% | 57.5% | 61.5% |
Permanent and inside IR35 come out identical, and that is not a rounding artefact: a deemed payment is taxed exactly like a salary, so at the same engager cost the arithmetic is the same one. What differs is everything the tax system does not price — holiday, sick pay, notice, an employer pension contribution. Inside IR35 buys none of them.
Outside IR35 keeps more, because most of the money arrives as dividends, which carry no National Insurance. The gap is narrower than contractor folklore suggests: corporation tax at 19–25% is charged before a penny is distributed, and between £50,000 and £250,000 of profit its marginal rate is 26.5% — the corporate echo of the personal corridor in section 03.
Read the gap as a risk premium, not a pay rise. It has to cover unpaid leave, gaps between contracts, your own pension, and the accountancy and insurance a company needs.
02 · Your next £1,000
Escape hatch: sacrifice £10,000 of salary into your pension and your take-home falls by only £3,800, while the full £10,000 lands in the pension.
03 · Marginal rate — the 62% corridor
Between £100,000 and £125,140 every extra pound is taxed at 62% — a higher marginal rate than anywhere else on the scale, including above it. Someone on £110k keeps less of their next pound than someone on £300k, which is why advertised salary bands cluster at £99,999 and £125k.
The £12,570 allowance is withdrawn at £1 for every £2 earned above £100,000 — an extra 20 points on top of 40% tax and 2% National Insurance. At £125,140 the allowance is gone, the 45% additional rate begins, and the marginal rate falls to 47%.
04 · Take-home — the flat shoulder
Take-home climbs steadily to £100,000, flattens through the corridor, then resumes. Against a counterfactual where the allowance is never tapered, the taper costs £5,028 a year at £125,140 — 40% tax on the allowance you no longer have — rising to £5,656 from £137,710, where that allowance would have been shielding income from the 45% rate instead.
05 · The £100,000 → £125,140 pay rise, in cash
A £25,140 raise across the corridor is the worst deal either side can strike: two-thirds of the employer’s money never reaches the employee. Hence the two Schelling points — just under £100k, or £125k and above, where the corridor ends.
UK PAYE · England & Northern Ireland · 2026/27 · rates as at 2026-08-25
Illustrative only, and not financial advice. Assumes a standard tax code, no student loan and no pension contributions. The day rate assumes 220 billable days a year — a convention, not a fact: 261 weekdays less 25 days of leave and 8 bank holidays is about 228, and 220 leaves slack for the days nobody bills. Assume 240 instead and the same salary implies a materially lower day rate. Monthly divides the year by 12 and weekly by 52. Income tax is assessed annually, so those divisions are exact; employee NI is really assessed per pay period, so the monthly and weekly NI figures are an approximation for irregular pay.
The salary-sacrifice figure is capped at the £60,000 pension annual allowance. That allowance tapers for very high earners, and unused allowance can be carried forward from earlier years; neither is modelled here, so treat the cap as a floor on what is possible rather than a ceiling.
Crossing £100,000 of adjusted net income also ends tax-free childcare and the free-hours entitlement, so for parents the effective marginal rate at that boundary can exceed 100%. A Plan 2 student loan adds 9 points, taking the corridor to 71%. Scotland’s corridor is worse still: the advanced rate is 45%, so the vanishing allowance adds 22.5 points rather than 20, and with 2% National Insurance the marginal rate reaches 69.5%.
The personal allowance and the £37,700 basic-rate limit are held at today’s levels until April 2031, so the higher-rate threshold stays £50,270 and fiscal drag pulls more salaries into the corridor every year. Separately, from April 2029 the National Insurance exemption on salary-sacrificed pension contributions is capped at £2,000 a year — income tax relief is unaffected, but the escape hatch above gets more expensive beyond that point.
The IR35 comparison assumes: inside IR35, the fee is a deemed employment payment taxed under PAYE, with the deemed employer’s National Insurance paid on top of it rather than deducted from it — which is why the comparison is drawn at the engager’s total outlay, the only figure that covers both; outside IR35, a single-director company paying a £12,570 salary and distributing all post-tax profit as dividends. It excludes the Apprenticeship Levy, VAT and the flat-rate scheme, business expenses, Employment Allowance (a sole director cannot claim it), any other income, and the withdrawn 5% deemed-expenses allowance. It also prices none of what employment includes — holiday, sick pay, notice, an employer pension contribution, or the cost of time between contracts.