Cybersecurity contractor on £110,000

Personal Ltd Co. Outside IR35. Age 36. 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%

The £100,000 cliff catches almost every higher-earning contractor

Before the numbers, a warning: a cybersecurity contractor at £110,000 of company profit for 2026/27 is sitting close to one of the UK tax code's sharpest cliffs.

The £100,000 Personal Allowance taper hits any individual whose adjusted net income (broadly, total taxable income before the PA itself) crosses £100,000. For every £2 over the threshold, £1 of Personal Allowance is lost, fully eroded at £125,140. The effective marginal rate inside this £25,140-wide band is 60% (40% income tax on the next £1, plus 40% × 50p of lost PA = 20p of additional tax). This row sits inside that band.

For a Ltd Co director, the standard mitigation is to push the next £1 of extraction into pension (employer contribution, no income tax, no NI, no Personal Allowance interaction) rather than dividend. For PAYE / sole-trader earners, salary sacrifice into pension achieves the same thing.

The numbers for this specific scenario

Bottom line for a cybersecurity contractor at £110,000 of gross income: net cash £39,440; pension £60,000; effective rate on gross 9.6%.

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

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.

Should I take the £12,570 standard director salary?

For this row the optimiser settled on a salary very close to the £12,570 standard — confirming the rule of thumb works here.

Why does the optimiser pay a salary above £5,000 if employer NI starts there?

Because beyond the £5,000 Secondary Threshold, each £1 of salary still saves 19–25% of corporation tax and only costs 15% in employer NI plus 8% employee NI — a net 11–17% saving up to the £12,570 Personal Allowance. The 2026/27 optimum for this row is £12,570 of salary, sitting in exactly this regime.

Why is the effective rate lower than the headline tax brackets?

Because the headline 20% / 40% / 45% rates apply only to the income slice in each band — not the whole income. The Personal Allowance shelters the first £12,570 at 0%; the basic-rate band only charges 20% on the next £37,700; and so on. The effective rate on the entire income is the weighted average of every slice — typically much lower than the headline number people quote.

What does the "marginal rate" mean on this page?

It is the rate paid on the next £1 of gross income added to this scenario. For this row that figure is 8.8%. The marginal rate is always higher than the average effective rate — it is the right number for "is one more invoice worth it" decisions.

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.