UK Freelance vs PAYE Calculator
Compare self-employed take-home pay against an equivalent PAYE salary, using real Income Tax, Class 4, and Employee NI rates.
Turnover minus allowable business expenses.
Freelance vs PAYE Take-Home
Self-Employed Take-Home
£36,568
PAYE Take-Home
£35,920
Self-employment leaves you about £649/year ahead, since Class 4 National Insurance (6%) is lower than Employee NI (8%) across the same income band. This doesn't account for lost paid holiday, sick pay, or employer pension contributions that PAYE employment typically includes.
Self-Employed
PAYE Employee
What Is the UK Freelance vs PAYE Calculator?
Choosing between a self-employed (sole trader) freelance income and an equivalent PAYE salary isn't just about the headline number on offer — the two routes are taxed differently. Both pay the same Income Tax on the same amount of income, but National Insurance works differently: self-employed profit is charged Class 4 National Insurance at 6%, while PAYE salary is charged Employee National Insurance at 8%, both on earnings between £12,570 and £50,270 (and 2% above that in both cases). This calculator compares take-home pay for the same amount of money under each route, using verified 2026/27 HMRC rates.
This is a narrower comparison than the full freelance-vs-employment decision — it isolates just the tax and National Insurance mechanics on a given amount of money. It doesn't attempt to value paid holiday, sick pay, employer pension contributions, job security, or the unpaid admin and gaps between contracts that come with self-employment — all real factors that belong in the bigger decision, covered in the tips below. For contracting through a limited company specifically, National Insurance and IR35 status work differently again, which is a separate calculation from the sole-trader comparison here.
UK Freelance vs PAYE Calculator Formula
Self-Employed Take-Home = Profit − Income Tax − Class 4 NI (6% / 2%)
PAYE Take-Home = Salary − Income Tax − Employee NI (8% / 2%)
How Is the UK Freelance vs PAYE Calculator Calculated?
Income Tax is identical between the two routes: the same £12,570 Personal Allowance (tapered above £100,000 adjusted income) and the same 20% / 40% / 45% bands apply whether the income is self-employed profit or PAYE salary. The difference is entirely in National Insurance. Self-employed profit pays Class 4 National Insurance at 6% on profit between £12,570 and £50,270, and 2% above that. PAYE salary pays Employee National Insurance at 8% on the same band, and 2% above £50,270 — the same upper-band rate, but a higher main rate.
Self-employed people also no longer pay compulsory Class 2 National Insurance once profits exceed the £7,105 small profits threshold — it's credited automatically toward the State Pension without a separate charge, so it isn't added as a cost here. This calculator also shows Employer National Insurance (15% above a £5,000 threshold) for context only — it isn't deducted from either take-home figure, since it's a cost to whoever is paying a PAYE salary, not to the employee, but it's useful context when negotiating a freelance day rate against an equivalent salaried role.
UK Freelance vs PAYE Calculator Example
£45,000 either way: as a self-employed profit, Income Tax is £6,486 and Class 4 NI is £1,946, leaving £36,568 take-home. As a PAYE salary, the same Income Tax applies but Employee NI is £2,594, leaving £35,920 — self-employment comes out about £649 ahead.
£80,000 either way: self-employed take-home is £57,711 versus £56,957 as PAYE salary — a gap of about £754, roughly the same absolute gap as the lower example once both incomes are above the £50,270 upper limit, where the 6% vs 8% rate difference stops applying to any further income.
£120,000 either way, where the Personal Allowance taper reduces the tax-free amount to just £2,570: self-employed take-home is £76,668 versus £75,914 as PAYE salary — the gap stays at roughly £754, since the taper affects Income Tax identically on both sides and doesn't change the National Insurance comparison.
How to Use the UK Freelance vs PAYE Calculator
Step 1
Enter your expected annual self-employed profit (turnover minus allowable business expenses).
Step 2
Enter the equivalent PAYE salary you want to compare it against.
Step 3
Compare the two take-home figures, and read the National Insurance breakdown to see exactly where the gap comes from.
Step 4
Weigh the tax gap alongside non-tax factors like paid holiday, sick pay, and pension contributions before deciding.
Benefits
- Uses verified 2026/27 Income Tax, Class 4 National Insurance, and Employee National Insurance rates.
- Isolates exactly how much of any take-home gap comes from National Insurance rate differences.
- Shows Employer National Insurance for context when negotiating a freelance rate against a salaried offer.
- Applies the £100,000 Personal Allowance taper correctly for higher earners on either route.
- Free, instant, and runs entirely in your browser.
Common UK Freelance vs PAYE Calculator Scenarios
Scenario 1
Comparing a freelance day-rate contract against a permanent PAYE job offer.
Scenario 2
Deciding whether to leave employment for self-employment at a similar income level.
Scenario 3
Understanding why identical gross income doesn't produce identical take-home pay.
Scenario 4
Negotiating a freelance rate that accounts for the employer National Insurance a client would otherwise pay.
Scenario 5
Explaining the National Insurance difference between sole trader and employee status to a client or accountant.
Understanding Your Result
The take-home gap you see is driven entirely by the 6% vs 8% National Insurance rate difference on income between £12,570 and £50,270 — self-employment is structurally favoured here, which is part of why HMRC has narrowed this gap over recent years (it was wider when Class 4 sat at 9%). Above £50,270, both routes pay the same 2% rate, so the absolute gap tends to plateau rather than keep growing once income clears that threshold.
This result is a tax-and-NI-only comparison. It doesn't mean self-employment is simply "better" — PAYE employment typically includes paid holiday, sick pay, employer pension contributions, and statutory protections that have real financial value beyond take-home pay, none of which are priced into this figure.
Tips
- A freelance day rate needs to cover more than an equivalent PAYE salary to truly match it, once you account for unpaid holidays, unbilled admin time, and no employer pension contribution — many freelancers target 20-30% above the PAYE-equivalent for this reason.
- The Employer NI figure shown is what a client effectively "saves" by engaging you as self-employed rather than hiring you as a PAYE employee — some freelancers use this as a reference point in rate negotiations.
- Remember that self-employed profit is assessed through Self Assessment, typically paid via Payments on Account twice a year rather than deducted automatically like PAYE.
- If you're genuinely unsure whether HMRC would classify your work as self-employed or as disguised employment, that's an IR35 question, not just a tax-rate comparison.
- Pension contributions work differently too — PAYE employees often get employer contributions on top of salary, while self-employed people fund 100% of their own pension from take-home profit.
Common Mistakes
- Comparing a freelance day rate to an annual PAYE salary without converting it to an equivalent annual figure first, accounting for unbilled days.
- Assuming the entire take-home gap is "extra income" without weighing lost paid holiday, sick pay, and pension contributions.
- Forgetting that self-employed profit is turnover minus allowable expenses, not the same as gross freelance income before costs.
- Not setting aside money for the Payments on Account structure, which can require paying more than one year's tax bill in a single year when starting out.
- Confusing this sole-trader comparison with contracting through a limited company, which has a different National Insurance and IR35 treatment.
Frequently Asked Questions
Why is Class 4 National Insurance lower than Employee National Insurance?
HMRC has historically set self-employed National Insurance rates lower than employee rates, partly because employees also benefit from Employer National Insurance contributions paid on their behalf, which self-employed people don't have an equivalent to. The gap has narrowed in recent years as Class 4 rates have been cut.
Do I need to pay Class 2 National Insurance as well?
Not compulsorily if your profits exceed the £7,105 small profits threshold — you're automatically credited toward your State Pension record without a separate charge. Voluntary Class 2 payments remain available below that threshold for those who want to protect their record.
Does this calculator account for VAT?
No — VAT registration (required once turnover exceeds the current threshold) affects pricing and invoicing but is generally a pass-through cost to clients rather than a direct reduction in your own take-home profit, so it's outside this calculator's scope.
What counts as an allowable business expense I can deduct from profit?
Common allowable expenses include equipment, software, a proportion of home office costs, business travel, and professional subscriptions — HMRC's rules are specific, so check gov.uk or a qualified accountant for what applies to your situation.
Is self-employment always more tax-efficient than PAYE?
On National Insurance alone, generally yes at the same income level under current rates — but PAYE employment often includes paid holiday, sick pay, and employer pension contributions with real financial value that this calculator doesn't price in.
What's the difference between this and contracting through a limited company?
Operating through a limited company involves Corporation Tax, dividends, and potentially IR35 rules, which is a materially different calculation from sole trader self-employment — this calculator only covers the sole trader comparison.
How is self-employed tax actually paid, compared to PAYE?
PAYE tax is deducted automatically from each payslip, while self-employed tax is calculated and paid through Self Assessment, often via two Payments on Account during the year plus a balancing payment — a materially different cash-flow experience.
Does the £100,000 Personal Allowance taper apply the same way to both?
Yes — the taper is based on adjusted net income regardless of whether it comes from self-employed profit or PAYE salary, and this calculator applies it identically on both sides of the comparison.
Should I use my day rate or my annual salary offer in this calculator?
Convert your day rate to an expected annual profit first (day rate × realistic billable days, minus expenses) before entering it, since this calculator compares annual figures rather than day rates directly.
Does this apply to Scotland's Income Tax bands?
No — this uses the England, Wales, and Northern Ireland Income Tax bands. Scotland has its own separate Income Tax band structure, though National Insurance rules are the same UK-wide.
What if my self-employed profit and PAYE salary offer are different amounts?
Enter each figure into its own field — the calculator doesn't require them to match, so you can compare genuinely different offers directly.
Can I share this comparison as an image?
Yes — tap Share and, on supported devices, your result is shared as a branded image card, not just a text link.
References
Important Information
This calculator provides estimates for informational purposes only and is not tax or financial advice. Uses confirmed 2026/27 HMRC Income Tax bands, Class 4 National Insurance, and Employee National Insurance rates (England/Wales/Northern Ireland); does not model VAT, Corporation Tax, limited company/IR35 structures, or Scottish tax bands. Confirm your specific situation with HMRC or a qualified accountant.
Last updated: August 2026