Engineering contractor on £180,000

Personal Ltd Co. Outside IR35. 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

£76,282

Pension

£60,000

Effective rate

24.3%

Marginal rate

33.8%

Step by step: how the engine arrived at the bottom line

The joint optimiser ran a grid search over (salary, pension) — salary in £100 steps from £0 to £60,000, pension in £500 steps from £0 to the £60,000 Annual Allowance — and evaluated each combination through the full tax stack. Here is the step-by-step trace that produced the optimum for a engineering contractor at £180,000 of company profit:

Salary chosen: £12,570. Sits between the £12,570 PA and the £50,270 higher-rate threshold (paying basic-rate income tax + main-band employee NI).
Employer NI on salary: £1,136 (15% above the £5,000 Secondary Threshold).
Pension chosen: £60,000 as an employer contribution — CT-deductible, no NI either side, no income tax until drawdown.
Pre-CT profit: £106,295 = company profit minus salary, minus employer NI, minus pension contribution.
Corporation tax: £24,418 (regime: marginal).
Dividend extraction: all post-CT profit paid out — £81,876.
Personal taxes: employee NI £0 on salary; income tax £0 on salary; dividend tax £18,165 on the dividend (after the £500 Dividend Allowance and stacked above salary in the band schedule).
Net cash: £76,282. Net wealth (cash + pension): £136,282.

The numbers, line by line

Optimum salary	£12,570
Optimum dividend	£81,876
Optimum pension	£60,000
Net cash (optimum)	£76,282
Net wealth (cash + pension)	£136,282
Rule-of-thumb net cash	£102,233
Rule-of-thumb net wealth	£102,233
Saving vs rule of thumb	£34,049
Effective rate on profit	24.3%
Marginal rate (next £1 dividend)	33.8%
Years to age-57 pension access	7
Annual pension contribution (this row)	£60,000
Projected pot at 57 (5% real, single-path)	£488,521
Sustainable income @ 4% SWR	£19,541/yr

Why this scenario is different

Compared to the closest peer profile — Software contractor at £180,000 — 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

What is the £500 Dividend Allowance and how is it used?

The first £500 of dividends in 2026/27 is taxed at 0%. It does not reduce taxable income — it sits as a 0% slice within the band schedule. So a basic-rate dividend recipient with £500 of dividends pays £0; with £600 of dividends pays 8.75% × £100 = £8.75. The £500 is consumed in band order (cheapest band first).

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 33.8%. The marginal rate is always higher than the average effective rate — it is the right number for "is one more invoice worth it" decisions.

What happens to my pension at age 55 / 57?

From age 55 (rising to 57 from 6 April 2028 per the Finance Act 2021) you can access defined-contribution pensions. The first 25% of the pot is tax-free (the "Pension Commencement Lump Sum"), subject to the £268,275 Lump Sum Allowance. The remainder is drawable at your marginal income-tax rate — but you can phase it across decumulation years to keep most of it within the 20% basic-rate band.

Does it include Scottish income tax?

No. Scotland has its own income-tax band schedule (Starter 19% / Basic 20% / Intermediate 21% / Higher 42% / Advanced 45% / Top 48% for 2026/27). National Insurance and corporation tax are still set at UK-wide rates. A Scotland-specific batch of programmatic pages is planned but is not in this batch.

Why do some columns of the table use cash and others use net wealth?

Net cash is the £ that arrive in your bank account. Net wealth includes pension contributions valued at face (£1 of pension = £1 of wealth, since it will eventually be spent — possibly at a lower marginal rate than today). The optimiser uses a `pensionWeight` parameter so the user can adjust the weight; this page sets it according to the row's `pensionPref` (0 / 0.5 / 1.0 for none / modest / aggressive).

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.