Architect contractor on £110,000

Personal Ltd Co. Outside IR35. Age 38. Pension preference: aggressive.

Every figure on this page is computed at build time by the same engines that power the live salary–dividend split, take-home and SIPP optimiser calculators. Inputs come from a single CSV row; outputs come from the engines. No static lookup tables, no hand-coded numbers.

Net cash

£39,440

Pension

£60,000

Effective rate

9.6%

Marginal rate

8.8%

What the popular advice gets wrong at this income

Every accountancy thread, IR35 forum and contractor podcast has its own simple rule for handling a architect contractor at this income level. The popular rules are:

"Just take a £12,570 salary and dividend the rest" — works between roughly £40k and £80k of profit; breaks down above the £100,000 PA-taper cliff and around the £50k–£250k corporation-tax marginal-relief band.
"60% goes to the tax man on anything over £100k" — true within the £25,140-wide taper band, but it is the marginal rate, not the average. Most contractors hear "60%" and assume their whole income is being taxed at that rate, which is wrong.
"Pension contributions don't help if you only have a Ltd Co" — wrong. Employer pension contributions are deductible against corporation tax, attract no NI either side, and are not personal income — making them the single most powerful lever in the high-rate / taper bands.
"The optimal salary is exactly the secondary threshold" — historically true; in 2026/27 the secondary threshold (£5,000) is so low that ignoring the £5k–£12,570 region is leaving free Personal Allowance on the table.

For a architect contractor at £110,000 of gross, the BracketMath optimiser disagrees with at least one of those rules — that's why we built it.

Specifically, the joint optimum at this profit level is £12,570 of salary, £29,399 of dividend, £60,000 of employer pension contribution. The rule-of-thumb baseline (£12,570 salary, no pension, max dividend) produces only £71,413 of net wealth — a shortfall of £28,027 versus the joint optimum.

The numbers, line by line

Optimum salary	£12,570
Optimum dividend	£29,399
Optimum pension	£60,000
Net cash (optimum)	£39,440
Net wealth (cash + pension)	£99,440
Rule-of-thumb net cash	£71,413
Rule-of-thumb net wealth	£71,413
Saving vs rule of thumb	£28,027
Effective rate on profit	9.6%
Marginal rate (next £1 dividend)	8.8%

Why this scenario is different

Compared to the closest peer profile — Software contractor at £110,000 — this scenario sits £0 higher on gross income. That moves net cash by +£0, the pension contribution by +£0, and the effective rate by +0%. The effective rate moves only modestly — both scenarios sit inside the same binding tax band. The optimiser shifts £0 of the extraction out of the dividend slice, and £0 out of pension contributions.

Questions this scenario raises

How much can I put into pension this year?

The 2026/27 pension Annual Allowance is £60,000. Below £260,000 of adjusted income the full £60,000 Annual Allowance is available. Carry-forward of unused AA from the last three tax years is available subject to membership-in-each-year rules.

Is the Employment Allowance available for a single-director company?

No. A company with only one director who is also the sole paid employee cannot claim the £10,500 Employment Allowance (HMRC manual ESM4017). For genuine multi-employee setups it is claimable and the optimiser can model it via the `claimEmploymentAllowance` flag.

Why does the optimiser want such a large pension contribution?

Because employer pension contributions dodge three taxes simultaneously: corporation tax (deductible), employer NI (none), and personal income tax / NI / dividend tax (none until drawdown). For this row the optimiser allocates £60,000 to pension — the largest tax shelter available to a director.

How is corporation tax calculated in this scenario?

At £103,104 of taxable post-pay profit, the company pays 19% corporation tax — the "small profits rate" for taxable profits ≤ £50,000.

Are dividends "double taxed" because corporation tax was already paid?

Yes — but the dividend tax rates (8.75% / 33.75% / 39.35%) are set lower than the equivalent income-tax rates (20% / 40% / 45%) precisely to account for the corporation tax already paid at company level. The combined CT + dividend tax stack is usually still cheaper than the salary stack of income tax + employer NI + employee NI for any single £1, which is why the optimiser puts most extraction through dividends.

Methodology

Income tax, National Insurance and Corporation Tax bands taken from HMRC's 2026/27 rates and allowances tables (gov.uk/.../income-tax; corporation-tax). Pension Annual Allowance and taper rules from Finance Act 2004 / 2023. Trading allowance per ITTOIA 2005 s.783A. Voluntary Class 2 figure (£179.40/yr = £3.45/wk × 52) from HMRC voluntary NI guidance.

Style: 2026/27 tax year throughout; figures rounded to whole pounds in the user-facing prose; effective rates computed as (deductions / gross). The voice is methodological — no first person, no claimed credentials, no marketing fluff.

This page is not personalised advice; for advice regulated by the FCA, consult an adviser registered with the Financial Conduct Authority. See the full disclaimer.