The four tax mechanisms acting on this income
For a senior consultant at £180,000 of gross income on the Ltd Co director route in 2026/27, four mechanisms determine the bottom line:
- The Personal Allowance — £12,570 of income at 0% income tax. Above £100,000 of adjusted net income the allowance tapers at £1 lost for every £2 over the threshold, fully eroded at £125,140. At £180,000 of relevant income this row sits past the taper — no Personal Allowance.
- The £50,270 higher-rate threshold — income tax jumps from 20% to 40% above this number. Dividend tax simultaneously jumps from 8.75% to 33.75%.
- National Insurance — on the salary slice only, at 8% employee + 15% employer above the relevant thresholds. The dividend slice attracts no NI — that is the central source of the Ltd Co tax-efficiency edge.
- Corporation tax — 19% on profits up to £50,000, 25% on profits above £250,000, with a 26.5% effective marginal rate in the £50k–£250k band (HMRC marginal-relief formula).
Run those four mechanisms in sequence and the bottom line for this row is £76,282 of net cash plus £60,000 into a pension, against £43,718 of taxes / NI / fees lost through the chain — an effective rate of 24.3%.
Where the optimal extraction sits
- Corporation tax: £24,418 on £106,295 of post-pay profit.
- Employer NI: £1,136 on the £12,570 salary (15% above the £5,000 Secondary Threshold).
- Employee NI: £0 on the same salary (8% main band, 2% above £50,270).
- Income tax: £0 on the salary (rUK bands, after personal allowance).
- Dividend tax: £18,165 on the £81,876 dividend (8.75% / 33.75% / 39.35% bands, stacked above salary).