IT contractor on £65,000

Personal Ltd Co. Outside IR35. Age 33. Pension preference: modest.

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

£49,013

Pension

£1,000

Effective rate

23.1%

Marginal rate

33.8%

Worked example: IT contractor, 33, £65,000 of company profit

Picture a it contractor aged 33 for the 2026/27 tax year, operating through a personal Ltd Co outside IR35, with £65,000 of profit before director pay. The optimisation goal for this profile is a balance of cash and pension contribution (modest pension preference, treating £1 of pension as £0.50 of cash for the search).

Running the engine for this exact profile:

Optimum salary: £12,570
Optimum dividend: £40,716
Optimum pension contribution: £1,000
Net cash to the director: £49,013
Net wealth (cash + pension): £50,013
Total tax + NI through the chain: £14,987 (23.1% effective on gross profit)
Money left on the table by the £12,570-salary rule of thumb: £13

The vignette is hypothetical but the numbers are not — every figure above was produced by the same engine code that powers the live BracketMath calculators, run at build time on inputs drawn from a single CSV row.

The numbers, line by line

Optimum salary	£12,570
Optimum dividend	£40,716
Optimum pension	£1,000
Net cash (optimum)	£49,013
Net wealth (cash + pension)	£50,013
Rule-of-thumb net cash	£49,500
Rule-of-thumb net wealth	£49,500
Saving vs rule of thumb	£13
Effective rate on profit	23.1%
Marginal rate (next £1 dividend)	33.8%

Why this scenario is different

Compared to the closest peer profile — Marketing consultant at £65,000 — 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

Why does the optimiser want such a large pension contribution?

For this row the pension contribution sits at £1,000 — the model preferred net cash today over the pension wrapper based on the pension-weight setting.

How is corporation tax calculated in this scenario?

The taxable post-pay profit falls in the £50,000–£250,000 "marginal-relief band". Corporation tax is computed as 25% of taxable profits minus marginal relief, producing an effective marginal rate of 26.5% on each pound between the two thresholds.

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.

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.