Employed vs self-employed
Thinking of going freelance, or already contracting? Switch between the day rate you'd need to match a salary, and the salary a day rate is really worth — both allow for the employer pension, unpaid holiday and benefits a salary quietly includes. 2026/27 rates.
Your figures
Billable days = working days left after holiday, bank holidays and gaps between contracts (around 220 of the 260 weekdays).
The maths
What this means
A salary and a day rate are different currencies
Compare £300 a day with a £40,000 salary and you're comparing apples with invoices. A salary quietly includes paid holiday, sick cover, an employer pension, and National Insurance handled for you. A day rate includes none of it: every day off is unpaid, the pension is your problem, and some of your calendar disappears into finding the next contract. This calculator converts in both directions with those hidden items priced in.
What £40,000 employed really bills at
Match a £40,000 salary with a 3% employer pension across 220 billable days and you need to invoice £186 a day, about £40,880 a year. Most people guess higher, because they forget the conversion runs on take-home equivalence rather than gross. Run the other direction and £300 a day comes to £66,000 of turnover, which this model prices as the equivalent of a £63,990 salary package. Nearly at par, but only because 220 billable days assumes a full, healthy year with no gaps between contracts, and the whole safety net is still yours to fund.
The 220-day assumption deserves a hard look
A year holds 260 weekdays. Knock off holiday, bank holidays, the odd sick day and any bench time between contracts and 220 billable days is honest for an established freelancer, generous for a new one. Slide it down to 190 and the day rate needed to match that £40,000 salary climbs sharply. Run your own pattern in the calculator, then check the sole-trader tax on the winning number with the self-employed tax calculator, or the payroll side with the take-home pay calculator.
Common questions
What day rate do I need to match my salary?
Usually more than you might think. You have to replace your employer pension yourself and you only bill part of the year, so to match a salary you typically need a higher annual profit, then divide it by your billable days. The calculator works out both the profit and the day rate for your figures.
Why do I need to earn more self-employed to be as well off?
Because a salary quietly includes things a sole trader must self-fund: an employer pension contribution, paid holiday, and sick or maternity pay. Replacing those, and billing fewer days than the 260 weekdays in a year, pushes the profit you need above your old salary.
Do sole traders pay less National Insurance than employees?
Yes, a little: Class 4 National Insurance is 6% where employee Class 1 is 8%, and there is no Class 2 above £7,105 of profit. But that small saving is usually dwarfed by the benefits you give up, which is why the headline National Insurance gap is misleading on its own.
These results are estimates for general information only and are not financial advice. Check every figure yourself and seek appropriate advice from a qualified professional before making any decision. Read the full disclaimer.