Builder on £85,000

Sole Trader. Age 50. 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

£57,967

Pension

£0

Effective rate

26.8%

Marginal rate

42%

Builder vs Ltd Co director at £85,000 — what changes

The decision a builder faces at £85,000 of income for 2026/27 is rarely "which calculator do I use" — it is "which legal structure leaves the most money in my pocket after tax." This page resolves the question for one specific scenario by running the relevant engines side-by-side at build time, so every number that follows is reproducible from a single CSV row and the BracketMath source code.

On the sole-trader route, taxable profits are £80,750 after the trading allowance / actual expenses decision, producing £57,967 of net cash after income tax + Class 4 + voluntary Class 2.

Incorporating instead — Ltd Co at the same turnover and expense pot — would produce £57,170 of net cash. The gap of £797 is in favour of the sole-trader route — at this turnover level the corporation-tax + dividend stack offers no edge over self-assessment. Against that gap, weigh the ~£800–£1,500/yr accountancy overhead, the public Companies House filing burden, and the loss of the trading allowance.

For a complete walk-through of the optimisation for this specific scenario, see the comparison table further down this page.

The numbers, line by line

Gross income	£85,000
Net cash	£57,967
Pension contribution	£0
Total deductions	£22,783
Effective rate	26.8%
Marginal rate	42%
Years to age-57 pension access	7
Annual pension contribution (this row)	£0
Projected pot at 57 (5% real, single-path)	£0
Sustainable income @ 4% SWR	£0/yr

Why this scenario is different

Compared to the closest peer profile — Freelance developer at £90,000 — this scenario sits £5,000 lower on gross income. That moves net cash by −£2,755, the pension contribution by +£0, and the effective rate by −0.7%. The effective rate moves only modestly — both scenarios sit inside the same binding tax band. Taxable profits change from £85,500 to £80,750 (after the trading-allowance / actual-expenses choice).

Questions this scenario raises

How does the Pension Annual Allowance taper work?

Above £260,000 of adjusted income, the £60,000 Annual Allowance reduces by £1 for every £2 over the threshold, down to a £10,000 floor at £360,000 of adjusted income. The taper bites later than the £100k Personal Allowance taper but is similarly punitive on pension contributions specifically.

How do I avoid the 60% taper?

For a salaried employee: salary sacrifice into pension. For a Ltd Co director: employer pension contribution. For a sole trader: personal pension contributions (which reduce adjusted net income). The taper-zone marginal of 60% means each £1 of pension contribution effectively costs the saver 40p of foregone cash — the strongest tax shelter the UK code currently offers.

What expenses can I deduct as a sole trader?

"Wholly and exclusively" business costs — equipment, software, professional insurance, travel to non-permanent workplaces, training that maintains existing skills, a proportionate share of home-office costs (HMRC simplified flat rates available), and accountancy fees. Personal commuting, entertainment, training to acquire new skills, and clothing (unless protective / uniform) are not deductible.

What is the £1,000 trading allowance and when does it help?

The trading allowance (ITTOIA 2005 s.783A) lets a sole trader deduct a flat £1,000 from gross trading income in lieu of claiming actual expenses. It strictly beats actual expenses whenever expenses are less than £1,000. The engine picks whichever produces lower taxable profits — for this row the chosen route is shown in the comparison table.

What tax year do these figures use?

2026/27 UK tax year (6 April 2026 – 5 April 2027), England, Wales and Northern Ireland rates. Scottish tax bands are not modelled in this calculation — Scotland has a separate Starter / Basic / Intermediate / Higher / Advanced / Top band schedule that will be added in a future batch.

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.