Management consultant on £220,000

Inside-IR35 Umbrella. Inside IR35. Age 44. 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

£98,266

Pension

£33,000

Effective rate

40.3%

Marginal rate

42%

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

The inside-IR35 engine ran the umbrella-deduction stack in the same order an umbrella company actually pays the money out. Here are the steps that produced the bottom line for a management consultant on a £1,000/day inside-IR35 contract (220 days assumed):

Contract value: £220,000 (day rate × 220 days).
Umbrella fee: £1,500 deducted off the top.
Salary sacrifice (pension): £33,000 taken off pre-tax / pre-NI as a salary sacrifice — by far the most efficient lever inside IR35.
Employer NI: £27,075 on what remains (15% above the £5,000 Secondary Threshold).
Gross deemed salary: the remainder is paid as a salary subject to PAYE.
Income tax: £54,980 at 20% / 40% / 45% on the deemed salary.
Employee NI: £5,179 at 8% main band, 2% above £50,270.
Net cash: £98,266. Net wealth incl. pension: £131,266.

Break-even day rate to match the outside-IR35 equivalent: £1,067/day.

The numbers, line by line

Day rate	£1,000
Contract value (220 days)	£220,000
Inside-IR35 net cash	£98,266
Inside-IR35 pension	£33,000
Outside-IR35 net cash	£103,935
Outside-IR35 pension	£33,000
Cost of being inside IR35 (net wealth)	£5,669
Break-even outside-IR35 day rate	£1,067

Why this scenario is different

Compared to the closest peer profile — Software contractor at £220,000 — 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 break-even outside-IR35 day rate moves from £1,067 to £1,067 per day.

Questions this scenario raises

What is the cost of being inside IR35 vs outside at this day rate?

For this row, operating inside IR35 instead of outside costs £5,669 per year of net wealth (cash + pension). To match the outside-IR35 take-home at the same day rate, an inside contract would need to be priced at approximately £1,067/day.

Why does the umbrella deduct employer NI before paying me?

Because the umbrella is your legal employer for tax purposes inside IR35. The contract rate paid to the umbrella covers the umbrella's employer-side costs first (employer NI at 15% above £5,000, plus its own margin / fee), then the residual is paid to you as a "deemed salary" through PAYE. The contractor is the economic incidence of the employer NI — it always was, but inside IR35 it is explicit on the payslip.

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 42.0%. 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 is the Personal Allowance and how is it used in this calculation?

The Personal Allowance is the first £12,570 of non-savings, non-dividend income on which no income tax is charged. It is consumed from the bottom up: salary first, then dividends. Above £100,000 of adjusted net income the allowance tapers at £1 lost for every £2 of income, fully eroded at £125,140 — producing the well-known 60% effective marginal rate inside that £25,140-wide band.

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.