Guide
Day rate to salary: what your contract is worth as a permanent job
Updated
Inside IR35, your umbrella gross pay is the honest salary equivalent: £500 a day over 46 weeks equals roughly a £99,000 salary, before a permanent role's pension, sick pay and paid holiday are counted.
Day rate to salary equivalent
Inside IR35, once the umbrella margin, employer NI and levy are funded from your rate, what is left is taxed exactly like a salary, so that gross pay figure is the comparable salary. At 46 working weeks and 5 days a week:
| Day rate | Annual invoice | Salary equivalent (umbrella gross pay) |
|---|---|---|
| £300 | £69,000 | £59,394 |
| £400 | £92,000 | £79,307 |
| £500 | £115,000 | £99,221 |
| £600 | £138,000 | £119,134 |
| £700 | £161,000 | £139,048 |
Salary to day rate: the quick rule
Going the other way, to match a salary S inside IR35 you need roughly (S × 1.155 + £400) ÷ 230 per day at 46 five-day weeks, the 1.155 regrosses employer NI and levy, the £400 nets the umbrella margin against the NI threshold. So a £60,000 salary needs about £303/day, £80,000 needs about £403/day, and £100,000 needs about £504/day.
What the comparison leaves out
- Employer pension, a permanent role adds at least 3% of qualifying earnings on top of salary; many professional employers pay 5–10%. A contractor must fund this from the rate.
- Paid holiday, already handled: the 46-week assumption prices your unpaid holiday in, and umbrella holiday pay is rolled into gross.
- Sick pay, notice and redundancy, the contractor carries all of this risk; insurance against it costs real money.
- Gaps between contracts, a 46-week year assumes about 6 weeks unbilled. A bad year has more.
Rule of thumb that survives contact with the numbers: a day rate is worth roughly the salary the table shows, minus whatever pension the permanent employer would pay, minus a risk margin you set yourself.