Senior IT contractor on £200,000

Personal Ltd Co. Outside IR35. Age 52. 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%

The decision tree for a senior it contractor at this income level

A senior it contractor thinking through "how should I structure this income for tax efficiency" hits the same five branches every time. Walk the tree for this exact scenario (gross £200,000 for 2026/27):

Is the engagement inside or outside IR35? Inside (umbrella) means no dividend extraction, no employer pension dodge, full PAYE deduction. Outside (Ltd Co) means access to the optimiser. This row models the outside-IR35 Ltd Co route.
Are you using the £12,570 Personal Allowance? Yes — fully. No other personal income is in play, so all £12,570 of PA is available to absorb the cheapest slice of structure-specific income.
Are you above the £100,000 PA taper? Yes — adjusted net income is roughly £200,000. The PA tapers to zero. The optimiser is steering the next slice of extraction into employer pension to dodge the 60% taper marginal rate.
How heavily are you using the pension wrapper? Aggressively — the search treats £1 of pension as worth £1 of cash, maximising long-run net wealth. The pension contribution chosen by the engine for this row: £60,000.
What is the resulting net cash? £85,212. Net wealth including pension: £145,212.

For the second-order question — what would happen at a different profit level, a different age, or a different pension preference — the same engine drives the salary-dividend split calculator, the take-home (inside vs outside IR35) calculator, and the SIPP optimiser. Each one accepts the inputs of this row as a starting point.

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%
Years to age-57 pension access	5
Annual pension contribution (this row)	£60,000
Projected pot at 57 (5% real, single-path)	£331,538
Sustainable income @ 4% SWR	£13,262/yr

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

How long will my pension pot last?

See the SIPP optimiser at /calculators/sipp-optimiser for a 10,000-path Monte Carlo answer. The widely-cited "4% safe withdrawal rate" comes from US data; the UK historical record produces a lower number (closer to 3.0–3.5%) due to inflation regime differences and slower equity returns. The calculator reports the probability of pot exhaustion explicitly.

How does the Pension Annual Allowance taper work?

Above £260,000 of adjusted income, the £60,000 Annual Allowance reduces by £1 for every £2 over the threshold, down to a £10,000 floor at £360,000 of adjusted income. The taper bites later than the £100k Personal Allowance taper but is similarly punitive on pension contributions specifically.

Are charity donations modelled?

No, not directly. Gift Aid donations reduce adjusted net income (extending the basic-rate band) and are a legitimate way to reclaim the £100k taper marginal. The BracketMath engine does not model them automatically; subtract the gift-aided amount from the "other income" field if you want a closer match.

Should I take the £12,570 standard director salary?

For this row the optimiser disagrees with the £12,570 rule of thumb — it places the optimum salary at £8,400. Above £8,400 the marginal cost (employer NI + employee NI + income tax) exceeds the marginal saving in corporation tax + dividend tax.

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.

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.