Guide
What is your day rate worth as a salary?
Billable days, why salary ÷ days is misleading, and the day rate you need to match a permanent salary's take-home.
“Is £400 a day good?” depends entirely on what you compare it with. Dividing a salary by the working days in a year gives a number that looks reasonable but ignores holidays, gaps between contracts, the employer’s costs and the benefits that come with a permanent job. Here’s how to compare them properly in 2026/27.
Start with billable days
A year has about 260 weekdays. Take off 8 bank holidays and the 25 days’ holiday you’d get in a permanent job, and you’re at about 227. Allow a little for sickness, training and the gaps between contracts, and 220 billable days is a sensible planning figure. Many contractors bill fewer, especially in their first year.
At 220 days, a day rate is worth its value × 220 a year before tax: £400 a day is £88,000, £500 is £110,000 and £600 is £132,000.
Why salary ÷ days is misleading
The simple sum (salary ÷ 220) compares gross with gross. But contracting income has costs a salary doesn’t: through an umbrella, the employer’s National Insurance and the apprenticeship levy come out of your rate; through a limited company, you pay running costs and corporation tax. Comparing take-home pay is the fair test.
| Salary | Perm take-home | Salary ÷ days | Umbrella rate | Ltd rate (outside IR35) |
|---|---|---|---|---|
| £40,000 | £32,320 | £182 | £212 | £200 |
| £60,000 | £45,357 | £273 | £317 | £282 |
| £80,000 | £56,957 | £364 | £422 | £389 |
| £100,000 | £68,557 | £455 | £527 | £500 |
Assumptions: permanent take-home is salary minus income tax and employee NI, with no pension or student loan. Umbrella margin £25 a week; limited company with £3,000 a year of costs, a £12,570 salary and the rest as dividends. England, Wales and Northern Ireland bands.
The umbrella rate is well above the simple salary ÷ days figure, because the rate has to fund the employer’s National Insurance and cover the days you don’t bill. The limited company rate is lower again, because dividends carry no National Insurance, but only if your contracts are outside IR35.
What a permanent job includes that a contract doesn’t
- Employer pension contributions, often 3% to 10% of salary. Add this to the salary before comparing if your offer is generous.
- Paid holiday and bank holidays (already allowed for in the 220-day figure).
- Sick pay, enhanced parental leave, a bonus, private medical cover, life insurance, training budgets.
- Continuity. No gaps between contracts and no time spent finding the next one.
A common rule of thumb is that a contract needs to pay at least 30% to 50% more than the equivalent salary on a daily basis to be worth the risk. The table above shows where that comes from.
Going the other way
If you’re a contractor weighing a permanent offer, run the same comparison backwards: work out your realistic contracting take-home over the days you actually billed last year, then see what salary gives the same after-tax figure, and add the value of the benefits on top.
This guide is general information, not financial or tax advice. Figures are estimates for England, Wales and Northern Ireland; speak to an accountant before making decisions.