Day rate of GBP 300 to annual take-home

Scenario

You have been offered a day rate of £300. A quick mental calculation — £300 × 5 days × 52 weeks — produces £78,000, but that figure is largely fictional. Contractors do not bill 52 weeks, and the gross figure is not the same as a salary for tax purposes. This example works through the realistic numbers using 2025-26 rules.

Realistic billable days

A full-time contractor typically bills 220–230 days per year after accounting for:

• 28 days statutory holiday (unpaid, because there is no holiday pay)
• Bank holidays (8 days)
• Gaps between contracts, bench time, and business development
• Admin days that cannot be billed

| Working assumption | Billable days | Gross annual income | |---|---|---| | Conservative (more gaps) | 220 days | £66,000 | | Optimistic | 230 days | £69,000 |

PAYE comparison table (illustration only)

The table below shows what these gross figures would produce if they were taxed exactly like a salary under PAYE. This is not how contractors actually pay tax. Most contractors operate via a limited company, paying themselves a salary/dividend split and paying Corporation Tax first. The PAYE column is a reference point only, to help compare against a salaried offer.

Using 2025-26 rates (personal allowance £12,570; basic rate 20% on £12,571–£50,270; higher rate 40% on £50,271–£125,140; employee NI 8% on £12,570–£50,270 and 2% above £50,270):

| Gross | Income tax | Employee NI | PAYE take-home | |---|---|---|---| | £66,000 | £13,832 | £3,331 | £48,837 | | £69,000 | £15,032 | £3,391 | £50,577 |

Tax workings at £66,000: - Taxable income: £66,000 − £12,570 = £53,430 - Basic rate: £37,700 × 20% = £7,540 - Higher rate: (£53,430 − £37,700) × 40% = £15,730 × 40% = £6,292 - Total tax: £13,832 - NI: £3,016 + (£66,000 − £50,270) × 2% = £3,016 + £315 = £3,331

Why £300/day is not the same as a £66,000 salary

Even if the PAYE comparison above showed identical take-home, the day rate is worth less in practice because:

• No holiday pay — 28 days unpaid at £300/day = £8,400 of income you cannot earn
• No employer pension — a permanent employee typically receives 3–10% employer contribution on top of salary
• No sick pay — statutory sick pay does not apply to limited company directors
• No employer NI paid on your behalf — clients pay no secondary NI contributions for contractors, but that saving goes to the client, not to you
• Tax and accounting overhead — accountant fees, payroll costs, and Companies House filings typically run £1,000–£2,500/year

Break-even rule of thumb

To find the equivalent permanent salary that a day rate competes with, add a loading of roughly 20–30% to cover benefits and gaps:

• £300 × 220 days = £66,000 gross
• Add 25% loading: equivalent package value ≈ £82,500

A permanent offer of around £80,000–£85,000 with full benefits would broadly match the value of a £300/day rate at 220 billable days — not £66,000.

Practical next step

Use the day-rate to salary calculator to adjust the billable-days assumption and compare the result directly against a salaried offer in the job offer comparison calculator.