Day Rate to Salary Guide — Is Your Day Rate Good?
Day rates are common in contracting, consulting, and freelance work. But converting a day rate to a true annual equivalent — and then to take-home pay — involves more assumptions than people realise.
How to Convert a Day Rate to Annual Salary
The standard formula is: Day rate × working days per year.
A typical UK contractor works roughly 230 billable days per year after accounting for:
- 52 weekends × 2 days = 104 days off
- 8 public (bank) holidays
- ~20–25 days holiday
- Occasional gaps between contracts (5–10 days)
This leaves around 230–235 genuinely billable days.
Day Rate Conversion Table
| Day Rate | Annual (230 days) | Annual (252 days) | Monthly Take-Home (PAYE) |
|---|---|---|---|
| £150/day | £34,500 | £37,800 | ~£2,340 |
| £200/day | £46,000 | £50,400 | ~£2,960 |
| £250/day | £57,500 | £63,000 | ~£3,420 |
| £300/day | £69,000 | £75,600 | ~£3,870 |
| £400/day | £92,000 | £100,800 | ~£4,970 |
| £500/day | £115,000 | £126,000 | ~£6,030 |
PAYE take-home estimates are approximate, England rates, 2025/26, no pension.
Day Rate vs Permanent Salary — What's the Real Difference?
Contractors typically earn a 20–40% premium over equivalent permanent employees to compensate for:
- No employer pension contributions
- No paid holiday or sick leave
- No redundancy pay
- Gaps between contracts
- Cost of accountancy and professional indemnity insurance
- IR35 risk
As a rule of thumb, a £300/day contract is roughly equivalent to a £65,000–£70,000 permanent roleonce employment benefits are factored in.
Limited Company vs PAYE Contractor
Operating through a limited company (PSC) can be more tax-efficient if you're outside IR35. You draw a low salary (typically around £12,570) and pay the rest as dividends, which are taxed at a lower rate than income tax. On £69,000 gross, a limited company contractor outside IR35 might take home £51,000+ compared to around £46,500 via PAYE.
However, IR35 reforms mean many contracts — particularly in the public sector and with large private sector clients — are now assessed as inside IR35, removing the tax advantage.