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Locum limited company vs umbrella vs PAYE

The same locum rate can be worth very different amounts depending on how you're paid. Compare yearly take-home through PAYE, an umbrella company or your own limited company, using 2026/27 tax rates.

Your work

2026/27 tax year
Assignment
£/hr
The rate paid to you, your umbrella or your company.
hrs
wks
Costs
£/wk
£/yr
£/yr
Company costs: accountant, indemnity, insurance, software.
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Take-home by route

Highest take-home: PAYE £86,410

£7,201 a month from £140,800 of assignment income.

PAYE£86,410
Umbrella£76,838
Limited company£82,119
+£5,281limited company vs umbrella, if outside IR35
£43.66umbrella take-home per hour
55%of income kept through an umbrella
Full breakdown
Per yearPAYEUmbrellaLimited company
Income£140,800£140,800£140,800
Umbrella or company costs£0−£19,008−£4,136
Corporation tax£0£0−£29,135
Income and dividend tax−£49,563−£40,507−£25,410
Employee NI−£4,827−£4,446£0
Take-home£86,410£76,838£82,119
Per hour£49.10£43.66£46.66

England, Wales and NI tax. Limited company assumes all profit paid as dividends, no pension contributions and no VAT. Only available outside IR35.

The three ways to be paid as a locum

PAYE through an agency or staff bank

The agency or trust bank is your employer for payroll. Income tax and National Insurance come off at source, and your employer pays employer National Insurance on top of your rate. Trust bank work can be pensionable in the NHS Pension Scheme.

Umbrella company

The agency pays an umbrella company, which employs you and runs your payroll. Before calculating your gross pay, the umbrella deducts its margin, employer National Insurance (15% above £5,000) and the apprenticeship levy (0.5%). Your payslip should show the full assignment rate and every deduction.

Your own limited company

Your company invoices the agency, pays corporation tax on its profit and pays you a salary and dividends. It's usually the most tax-efficient route, but it's only available for work that's outside IR35, and it comes with extra admin: company accounts, a corporation tax return and Self Assessment.

IR35 and NHS locum work

Under the off-payroll working rules, public sector bodies including NHS trusts decide whether each engagement is inside or outside IR35. If the work is inside IR35, tax and National Insurance must be deducted as if you were an employee, so a limited company gives no tax advantage. Most NHS trusts treat locum doctor shifts as inside IR35. Read HMRC's guidance on off-payroll working and check the status determination statement for each engagement.

Comparing rates from agencies

Agencies often quote two rates for the same shift: a PAYE rate and a higher "umbrella or limited company" rate. The higher rate has to cover employer National Insurance and the levy, so the two can give similar take-home pay. Enter each quoted rate separately to see which pays you more.

Frequently asked questions

Can NHS locums work through a limited company?
Only if the engagement is outside IR35. Since 2017, NHS trusts and other public bodies must decide whether each engagement is inside or outside IR35. Most NHS trusts treat locum doctor shifts as inside IR35, which means the locum is paid through PAYE or an umbrella company instead.
Why is umbrella take-home lower than PAYE at the same rate?
An umbrella company is your employer, so it pays employer National Insurance (15% above £5,000), the apprenticeship levy (0.5%) and its own margin out of the rate the agency pays it. With agency PAYE, the agency pays those costs on top of your rate. That's why agencies usually quote a higher umbrella or limited company rate than a PAYE rate for the same shift.
How are limited company locums taxed?
The company pays corporation tax on its profit (19% up to £50,000, 25% above £250,000, with marginal relief in between). You then pay income tax on your salary and dividend tax on dividends, at 10.75%, 35.75% or 39.35% in 2026/27, after a £500 dividend allowance.
What director's salary should a locum limited company pay?
Many single-director companies pay a salary equal to the personal allowance (£12,570), which is tax-free for the director and deductible for corporation tax. Employer National Insurance is due above £5,000, and a company with only one director can't claim the Employment Allowance. Speak to an accountant about your own situation.

Sources

Last updated .