Umbrella vs Limited Company Calculator (Ireland 2026)

How the comparison works

An umbrella scheme treats you as a PAYE employee of the umbrella provider. They invoice the end client, pay you a salary, deduct income tax, PRSI Class A and USC at source, and charge an admin fee. Expenses are restricted - Revenue only permits the e-working / home-office allowance for most contractors under the 2024 enforcement guidance.

A limited company makes you a proprietary director (you own more than 15% of the share capital). You pay yourself a director's salary up to the tax-credit floor, expense legitimate business costs against corporation tax at 12.5%, and extract the remaining profit as a dividend or retain it for future drawdown. Proprietary directors are PRSI Class S, so there is no employer-side PRSI charge on the salary.

Which structure suits which contractor?

Umbrella wins on simplicity. No CRO filings, no annual accounts, no preliminary tax cash-flow. If you are contracting for a short window between permanent roles, or you don't intend to grow beyond a single-person company, umbrella saves you the admin overhead.

Limited company typically wins on take-home, but the size of the win depends heavily on your extraction strategy. Under same-year full extraction (100% dividend), the Ltd Co is roughly break-even with umbrella once you factor in dividend PRSI, USC and the loss of the Employee Tax Credit on the dividend portion. The structural advantage opens up when you (a) leave profit inside the company to defer personal tax, (b) push pension funding through the employer route, which sits outside personal age-banded limits and is fully deductible against corporation tax, or (c) plan eventual extraction via CGT-relieved disposal. Build a real shortlist of accounting software for Irish contractors before you incorporate - the right setup costs €30-€60/month and pays for itself in time saved on filings.

How the retained-earnings toggle changes the answer

If you take 100% of after-CT profit as a dividend every year, retained earnings are zero and the toggle does nothing. The interesting case is the default 50% extraction, where roughly half of after-CT profit sits in the company as retained earnings.

The calculator's "exclude" option treats retained earnings as worth zero in your headline take-home - mathematically pure (you have not been personally taxed yet) but counter-intuitive, because that retained cash is real and will eventually reach your hands. The "discount 70%" option (default) credits that retained profit at 70 cents on the euro, reflecting a realistic blend of future extraction paths: marginal-rate dividend in a future year, pension drawdown via the tax-free lump sum (first €200,000 under Revenue's pension lump sum rules), and eventual disposal under Entrepreneur Relief at 10% CGT. The "discount 90%" option assumes you will time extraction around CGT reliefs - Retirement Relief gives a full CGT exemption to €750,000 for over-55s on the sale of qualifying business shares, dropping to a €500,000 cap for over-66s under the Finance Act 2024 changes.

None of these are guarantees. The 70% midpoint is a rule of thumb, not a personalised projection. Entrepreneur Relief requires you to own at least 5% of the ordinary shares for at least three years and to work in a full-time director or employee role. Retirement Relief has its own qualifying-period and disposal-route conditions. And the close company surcharge under Section 440 TCA levies 15% on undistributed trading income for service companies that retain profit beyond 18 months - which would reduce the retained-earnings credit if applied in practice. Treat the toggle as a sensitivity test on your extraction plan, not a promise of after-tax outcome.

Frequently asked questions

Are umbrella expenses really limited to €350?

Revenue tightened the enforcement of contractor expense claims in 2023-2024. For most umbrella workers, only the e-working allowance (€3.20 per day worked from home) is realistic. Travel, training, equipment and professional subscriptions are generally not deductible inside an umbrella arrangement unless you can prove the wholly, exclusively and necessarily test. Talk to your umbrella provider - some still claim broader expense capability, but they are operating at risk.

What salary should I take from a Ltd Co as a contractor?

The default of €20,000 in this calculator uses your Personal Tax Credit (€2,000) and Employee Tax Credit (€2,000) in full, while staying well inside the 20% standard-rate band. Higher salaries push more income to the 40% rate plus PRSI Class S plus USC, which generally costs more than extracting the same amount via dividend.

Why does this calculator skip employer PRSI on the Ltd Co?

Because an IT contractor running a single-person limited company is almost always a proprietary director (over 15% shareholding). Proprietary directors pay PRSI under Class S, which has no employer-side contribution. If you set up a Ltd Co where you hold under 15% of the share capital - rare for a contractor - PRSI Class A applies and the employer charge of 11.4% kicks in. This calculator models the standard contractor case.

How does the pension contribution actually save tax?

Under umbrella, your personal contribution is deducted from gross pay before income tax, PRSI and USC are calculated, up to the Revenue age-banded limit. Under a limited company, the company contributes directly to your PRSA or occupational scheme as an employer contribution - this is a corporation-tax deduction, no benefit-in-kind charge applies, and there is no personal PRSI or USC cost. The employer route is generally more tax-efficient for high-earning contractors approaching the standard-rate band ceiling.

What about VAT registration?

If your annual billings exceed €42,500 for services, you must register for VAT. Both umbrella and Ltd Co structures handle this - umbrella providers absorb VAT registration on your behalf; with a limited company you register the company. The calculator excludes VAT from the take-home math because it is a pass-through to the end client.

Why credit retained earnings at 70% in the default view?

Retained earnings are real value, but they have not been personally taxed yet. The strict same-year view (the "exclude" option) credits them at zero, which understates the Ltd Co's true position. The opposite extreme - crediting them at 100% face value - overstates it, because future extraction always carries some tax. 70% is the midpoint between worst-case marginal-rate dividend extraction (income tax 40% plus PRSI 4.2% plus USC up to 8%, around 48% surviving) and best-case Entrepreneur Relief or pension lump-sum extraction (around 90% surviving). Switch to 90% if you have a defined long-term plan to extract via CGT relief or retirement; switch to exclude if your time horizon is genuinely undefined.

Does the calculator factor in the close company surcharge?

No. Under Section 440 TCA, a close service company that retains trading income beyond 18 months suffers a 15% surcharge on the undistributed portion (20% on undistributed investment income). The calculator's discount rates do not bake this in. If you plan to retain profits for multiple years without an active extraction route, talk to your accountant about whether the surcharge will apply and how that reshapes the Ltd Co case.

Related Vendors.ie resources

• Best accounting software for Irish contractors - vendor-by-vendor comparison sized for one-person Ltd Cos.
• Software stack for consultants and contractors in Ireland - the full stack guide beyond accounting.
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