Finance contractor on £200,000

Personal Ltd Co. Outside IR35. Age 42. 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

£85,212

Pension

£60,000

Effective rate

27.4%

Marginal rate

33.8%

What a finance contractor on £200,000 of company profit actually takes home

A finance contractor running a personal Ltd Co with £200,000 of profit before director pay (2026/27 rUK rates) can extract that profit as some mix of salary, dividend and employer pension. The joint optimum — the combination that produces the highest net wealth — pays £8,400 as salary, £100,101 as dividend and £60,000 as an employer pension contribution. Total tax + NI through the chain comes to £54,788 — an effective rate of 27.4% on company profit.

The "rule of thumb" baseline — £12,570 salary, no pension, max dividend — leaves £34,063 on the table at this profit level. That gap is the value of solving the four-band salary problem (LEL / PT / ST / £12,570) jointly with the pension decision rather than picking each one independently.

The five tax lines that produce the optimum

Corporation tax: £30,989 on £131,090 of post-pay profit.
Employer NI: £510 on the £8,400 salary (15% above the £5,000 Secondary Threshold).
Employee NI: £0 on the same salary (8% main band, 2% above £50,270).
Income tax: £16 on the salary (rUK bands, after personal allowance tapered above the £100,000 threshold).
Dividend tax: £23,273 on the £100,101 dividend (8.75% / 33.75% / 39.35% bands, stacked above salary).

Net cash to the director: £85,212. Pension contribution (locked until age 55, rising to 57 from 6 April 2028 per the Finance Act 2021): £60,000. Net wealth on the all-£1-is-equal view: £145,212.

The numbers, line by line

Optimum salary	£8,400
Optimum dividend	£100,101
Optimum pension	£60,000
Net cash (optimum)	£85,212
Net wealth (cash + pension)	£145,212
Rule-of-thumb net cash	£111,149
Rule-of-thumb net wealth	£111,149
Saving vs rule of thumb	£34,063
Effective rate on profit	27.4%
Marginal rate (next £1 dividend)	33.8%

Why this scenario is different

Compared to the closest peer profile — IT contractor at £200,000 — 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 happens if I retain profit in the company instead of extracting it?

The optimiser models full extraction (max-extraction mode). Retaining profits inside the company defers the dividend-tax slice but pays corporation tax now. If the retained cash is invested at company-level the returns face corporation tax annually. If the company is later sold and qualifies for Business Asset Disposal Relief, retained profits can be extracted at 10% CGT — but BADR rules and the lifetime allowance keep tightening (currently £1m lifetime cap). For most contractors, extract now is the right call.

Are dividend tax rates rising in 2026/27?

No — the 8.75% / 33.75% / 39.35% rates were set in 2022 and have been held flat through 2026/27. The Dividend Allowance has been reduced from £2,000 (2022/23) to £500 (2024/25 onwards) which has the same effect as a ~£175 tax rise at any rate band. This figure is built into every dividend-related calculation on the site.

Is the figure on this page net of accountancy fees?

Yes when relevant — the take-home calculator deducts an umbrella fee for inside-IR35 rows (£1,500/yr assumed) and the optimiser allows for an arbitrary annual business expense pot (£3,500/yr default for Ltd Co rows). Sole-trader rows assume the higher of £800/yr or 5% of turnover as actual business expenses, which approximates a low-overhead service business.

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.

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.

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.