TheFreeTool

UK Contractor Day Rate Calculator

A £55,000 salary does not mean a £212 day rate. Contractors do not get paid holidays or sick pay, and contracts have gaps. Enter your target salary and the days you will not bill, and see the day rate that really matches it.

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Where the numbers come from

Good to know

This is an estimate for general information. It is not tax, legal or financial advice. Your payslip can differ because of tax codes, credits, local taxes, benefits and your employer's rules. Check official guidance or ask a qualified adviser.

What it does

  • Works from the salary you want to match
  • Adds the employer National Insurance, pension and benefits you would lose
  • Takes off holidays, bank holidays, sick days, training and gaps between contracts
  • Shows your day rate, hourly rate, weekly and monthly billings
  • Adds your running costs, such as insurance and accountancy

How to use it

  1. Enter the permanent salary you want to match.
  2. Add the pension percentage and benefits value your employer would give you.
  3. Enter the days you will not bill: holiday, bank holidays, sickness, training and gaps.
  4. Add your yearly business costs and read the day rate you need.

Why is a day rate so much higher than salary divided by 260?

There are about 260 working days in a year, but an employee is paid for all of them, including holiday and sick days. A contractor only earns on the days they work. If you take 25 days of holiday, 8 bank holidays, 5 sick days, 3 training days and expect 10 days between contracts, you bill only around 209 days. Your day rate has to cover the whole year in those days.

A fair comparison also counts what an employer pays on top of salary. That includes employer National Insurance (15% above £5,000 from April 2025), a pension contribution and any benefits. A contractor has to cover the equivalent themselves, plus insurance, accountancy and other costs. Remember that the day rate is before your own tax. Whether a contract is inside or outside IR35 changes how you are taxed, so take advice and check HMRC's status guidance.

Example

To match a £55,000 salary, add £7,500 employer National Insurance, £2,750 pension at 5%, £1,500 benefits and £2,000 business costs. That is £68,750. With 209 billable days, the day rate is about £329, or about £44 an hour on a 7.5-hour day.

Questions people ask

Is this rate before tax?
Yes. It is what you invoice. Contractors pay their own tax and National Insurance, and how much depends on how you work, such as through a limited company or an umbrella.
What is IR35?
It is a set of rules that decide whether a contractor should be taxed more like an employee. HMRC's online Check Employment Status for Tax tool and professional advice can help you decide.
How many days should I assume for gaps?
It depends on your field. Ten days a year is a cautious start for steady work. Use a higher number if your contracts are short.
Why include employer National Insurance?
Because an employee's salary comes with it, and as a contractor you are replacing the whole package. Leave it ticked for a fair comparison, or untick it if it does not apply to you.
Is this financial or tax advice?
No. It is a general guide. Speak to a qualified accountant about your own situation.

Disclaimer

This tool is for general information only. It is not financial, tax, investment or legal advice, and results are estimates that may differ from your bank, lender or tax authority. Rates, limits and tax rules change. Bank and brand names are used only to describe what the tool does; they belong to their owners and we are not affiliated with them. Check the figures with a qualified professional or your provider before you decide. You use this tool at your own risk, and TheFreeTool is not liable for any loss that follows. Read the full disclaimer

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