Moving from PAYE to invoicing clients changes not only your tax wrappers, but how cash hits your account through the year. This tool keeps the arithmetic explicit so you can negotiate day rates with your eyes open.
How PAYE quoting differs from your invoice total
Employers operate PAYE at source. You see tax and primary National Insurance withheld before money
reaches you. Above the upper earnings limit, NI rates step down—mirroring, imperfectly, how Class 4 works
for self-employed profits.
On the freelance path, you must reserve cash for payments on account and student loan, where applicable.
Our model approximates your operating profit after common business expenses—layer your own accountant's
adjustments for capital allowances and basis periods.
Student loans and marginal pressure
Plan thresholds interact with your earned or trading income. At common tech salaries, an extra £1 of
profit can trigger nine pence of student loan alongside income tax and NI—an effective marginal rate that
surprises people who only looked at headline income tax bands.
Pension auto-enrolment
We assume a typical employee contribution for illustration and show employer pension as part of total
reward. You can adjust figures to mirror your scheme. Drawdown, annual allowance, and tapered protections
are outside the scope of this simple sheet.
FAQ
Does this cover umbrella companies or inside-IR35 engagements?
Not specifically. Treat quoted day rates as indicative and discuss IR35 status with a specialist.
Are dividends modeled for limited company contractors?
This page targets sole trader math; limited-company splits deserve a bespoke model involving salary vs dividends.