£100,000 PAYE vs Self-Employed 2025-26
Income tax · National Insurance · Take-home pay comparison
£100,000 — PAYE vs self-employed full comparison 2025-26
| Item | PAYE (employed) | Self-Employed |
|---|---|---|
| Gross income | £100,000 | £100,000 |
| Income Tax | −£27,432 | −£27,432 |
| Employee NI (8%/2%) | −£4,011 | — |
| Class 2 NI (£3.45/wk) | — | −£179 |
| Class 4 NI (6%/2%) | — | −£3,257 |
| Total NI | −£4,011 | −£3,436 |
| Annual take-home | £68,557 | £69,132 |
| Monthly take-home | £5,713 | £5,761 |
| Effective rate (IT+NI) | 31.4% | 30.9% |
Self-employed takes home more at £100,000
At £100,000, self-employed workers take home £575/year more than PAYE employees. This is because Class 4 NI (6%) is lower than employee NI (8%) on earnings between £12,570 and £50,270, and the saving exceeds the Class 2 NI flat charge (£179/year).
Note: this comparison looks only at tax and NI. Self-employment also removes access to statutory sick pay, employer pension contributions, and employment rights. Factor these in before switching.
Personalised insights on £100,000
- Break-even point: Class 4 NI saves 2% vs Class 1 on profits between £12,570 and £50,270; Class 2 adds a £179/year flat charge. They break even around £21,540 of profit. At £100,000, you are above the break-even — so self-employment is structurally cheaper on NI at this income level.
- NI breakdown at £100,000: Employee NI (Class 1) = £4,011. Self-employed = Class 2 £179 + Class 4 £3,257 = £3,436. The Class 4 saving vs Class 1 on the £12,570–£50,270 band is worth roughly £754/year — against which Class 2 costs £179/year.
- What the £575 annual gap actually buys: £575/year = £11/week, £2/working day, 0 months of National Living Wage income, or 0.02 full NLW years. Over a 10-year career, that compounds to £5,750 before investment returns.
- If you earned £5,000 more: PAYE take-home rises by £1,900/year (marginal rate 62%). Self-employed take-home rises by £1,900/year (marginal rate 62%). On £105,000, the structure choice still favours self-employment on pure NI efficiency.
- Hidden employer NI: an employer hiring a PAYE worker on £100,000 also pays roughly £14,250/year in employer NI (15% on salary above £5,000 from April 2025) — a total cost of £114,250. Self-employed workers have no employer-side NI, which is why a contract at the same headline rate is effectively cheaper for the client and often nudges rates higher for self-employed workers.
£100,000 PAYE vs self-employed — what's the difference?
At £100,000, both employees and self-employed workers pay the same Income Tax (£27,432). The entire difference in take-home pay comes from National Insurance.
Employees pay 8% employee NI on earnings between £12,570 and £50,270, and 2% above. Self-employed workers pay Class 4 NI at 6% on profits in the same range, plus Class 2 NI (£179/year — £3.45 × 52 weeks). Class 4 at 6% is lower than employee NI at 8%, but Class 2 partially offsets this saving at lower income levels.
At £100,000 you keep 69% of gross income via PAYE and 69% via self-employment. PAYE take-home equates to 2.9× the National Living Wage (£23,810/year); self-employed take-home equates to 2.9× NLW. The £575/year gap (£11/week, £2/working day) stems entirely from the NI structure: above the roughly £21,540 break-even, Class 4 at 6% beats Class 1 at 8% by more than the Class 2 flat charge.
Employer NI is not deducted from your pay either way — it is a cost borne by the employer on top of your salary. At £100,000, an employer hiring you on PAYE pays approximately £14,250 in employer NI (15% on salary above £5,000 from April 2025), bringing the true cost of employment to £114,250. Self-employed workers have no employer-side NI at all, which is one reason contract day rates for the same role typically price in a meaningful premium over equivalent salaried positions.
If your income rose by £5,000 to £105,000, a PAYE employee would keep £1,900 of that rise (marginal rate 62%), while a self-employed person would keep £1,900 (marginal rate 62%). At this level both structures face the same Income Tax bracket, so the marginal difference reflects NI alone. Before switching structure, weigh this annual gap against non-financial factors: PAYE gives you statutory sick pay, holiday pay, employer pension contributions, and employment rights — none of which self-employment provides.
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Frequently asked questions
Do self-employed pay more tax than employed on £100,000?
No — at £100,000, self-employed workers pay less overall tax and NI. PAYE: £68,557/year take-home; self-employed: £69,132/year — a difference of £575/year in favour of self-employment. Class 4 NI (6%) is lower than employee NI (8%) on earnings between £12,570 and £50,270.
What NI do self-employed pay vs employed on £100,000?
On £100,000, an employee pays £4,011 NI (8% on £12,570–£50,270, 2% above). A self-employed person pays £3,436 total NI: Class 2 £179 (£3.45 × 52 weeks) plus Class 4 £3,257 (6% on profits £12,570–£50,270, 2% above). Income Tax is identical at £27,432 for both.
Is it worth going self-employed at £100,000?
The tax difference at £100,000 is £575/year (£48/month) in favour of self-employment. However, self-employment also means no employer pension contributions, no statutory sick pay, no maternity/paternity pay, and no employment protections. The financial decision depends on whether any higher rate for your work compensates for these lost benefits.
How does income tax differ for PAYE vs self-employed?
Income Tax is identical for employees and self-employed workers in England/Wales/Northern Ireland. Both use the same Personal Allowance (£12,570), basic rate (20% on income £12,570–£50,270), higher rate (40%), and additional rate (45%). At £100,000, both pay £27,432 income tax. The only tax difference is National Insurance.
How much more do I take home each month as PAYE vs self-employed on £100,000?
At £100,000, a PAYE employee takes home £5,713/month, while a self-employed person takes home £5,761/month. The monthly difference is £48. Annually, PAYE net pay is £68,557 versus £69,132 self-employed. The effective tax rate is 31.4% (PAYE) vs 30.9% (self-employed).
Do self-employed workers pay employer NI at £100,000?
No. Self-employed workers do not pay employer NI (13.8% on earnings above £9,100). They only pay Class 2 NI (£179/year) and Class 4 NI (£3,257 at 6% on profits £12,570–£50,270). Employer NI is a cost borne by the employer and does not come out of employee or self-employed take-home pay. This is why self-employment can sometimes be more tax-efficient — the employer NI saving goes to the worker indirectly through higher rates.