Is PAYE or self-employed better at £45,000?

At £45,000, PAYE leaves you with approximately £34,200 net, while self-employed leaves you with around £36,450. Self-employment usually wins on take-home alone but loses on employee benefits like sick pay, holiday and pension contributions.

Why does self-employed take more home than PAYE at the same gross?

Self-employed workers pay no Employer's NI (because there's no employer), and Class 2/4 NI rates are lower than employee Class 1. They can also deduct legitimate business expenses before tax. The trade-off is no statutory benefits, no auto-enrolment pension, and the admin of Self Assessment.

£45,000: PAYE vs Self-Employed

Same headline number, two very different take-home figures. Here is what £45,000 a year looks like in both setups for the 2026/27 tax year.

PAYE Employee

£34,200

Net per year

Self-Employed

£36,450

Net per year (before expenses)

Where the difference comes from

Both roles pay the same Income Tax bands (20%, 40%, 45%) on the same Personal Allowance. The take-home gap comes mainly from National Insurance:

PAYE employees pay Class 1 NI at 8% on earnings between £12,570 and £50,270, then 2% above. Their employer also pays Class 1A NI on top — that doesn't come out of pay, but it's a real cost of employment.
Self-employed sole traders pay Class 4 NI at 6% on profits between £12,570 and £50,270, and 2% above. Class 2 has been effectively abolished from 2024. No employer NI exists, because there's no employer.

On top of that, self-employed workers deduct legitimate business expenses (home office, mileage, equipment, professional subscriptions, software) before tax — which the figure above doesn't account for. In practice, the real-world self-employed take-home is often higher than the headline.

But the headline number isn't the whole picture

Take-home maths favours self-employment. Lifestyle maths often doesn't. Things PAYE employees get for free:

Holiday pay (typically 28 days including bank holidays)
Statutory Sick Pay (currently £116.75/week)
Auto-enrolment workplace pension with employer contributions (usually 3–6%)
Parental leave and pay
Redundancy protection
No need to file Self Assessment
Employer-provided benefits (gym, healthcare, share schemes)

Combined, those benefits are typically worth 15–25% of gross salary. The headline take-home gap of a few thousand pounds may not be enough to offset losing them.

The third option: limited company

For incomes above roughly £40,000, neither pure PAYE nor sole-trader self-employment is usually the most tax-efficient route. A limited company structure — small director salary plus dividends — typically beats both, particularly at £75k–£150k of income. The catch is admin: Corporation Tax, dividend vouchers, Companies House filings, an accountant on retainer (£100–£200/month is typical). For specialist contractors that maths usually pencils. For one-off side income, sole trader is simpler.

IR35 — the big "but"

If you intend to be self-employed but work mainly for one client in ways that look employment-like (fixed hours, your client's equipment, supervised work), HMRC may rule the engagement "inside IR35" and tax you as an employee anyway. The 2021 off-payroll rules made the end-client responsible for that determination for medium and large businesses. Anyone planning to step out of PAYE for a single client needs to check IR35 status before committing.

Run the calculator on a different number ›

Other comparison amounts

£25k £30k £40k £50k £75k £100k

Comparison is illustrative and assumes no allowable business expenses for the self-employed figure. Real-world self-employed take-home is generally higher once legitimate expenses are deducted. Limited company structures can be more efficient again for higher incomes — but bring administrative cost and IR35 risk. Please consult a qualified accountant for any decision affecting employment structure.