Software contractor on £140,000

Personal Ltd Co. Outside IR35. Age 40. 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

£56,804

Pension

£60,000

Effective rate

16.6%

Marginal rate

33.8%

What a software contractor on £140,000 of company profit actually takes home

A software contractor running a personal Ltd Co with £140,000 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 £12,570 as salary, £52,476 as dividend and £60,000 as an employer pension contribution. Total tax + NI through the chain comes to £23,196 — an effective rate of 16.6% on company profit.

The "rule of thumb" baseline — £12,570 salary, no pension, max dividend — leaves £31,698 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: £13,818 on £66,295 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: £8,242 on the £52,476 dividend (8.75% / 33.75% / 39.35% bands, stacked above salary).

Net cash to the director: £56,804. 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: £116,804.

The numbers, line by line

Optimum salary	£12,570
Optimum dividend	£52,476
Optimum pension	£60,000
Net cash (optimum)	£56,804
Net wealth (cash + pension)	£116,804
Rule-of-thumb net cash	£85,106
Rule-of-thumb net wealth	£85,106
Saving vs rule of thumb	£31,698
Effective rate on profit	16.6%
Marginal rate (next £1 dividend)	33.8%

Why this scenario is different

Compared to the closest peer profile — Software contractor at £140,000 — 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 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.

How many qualifying years do I need for the full new State Pension?

35 qualifying years for the full new State Pension. With fewer, the pension is pro-rated (1/35 per year). A minimum of 10 qualifying years is required for any new State Pension. Voluntary Class 2 (sole traders) or Class 3 (everyone else) can plug gaps in the NI record.

Why does the page link to specific other professions?

The five linked pages at the bottom are computed by a similarity metric over (profession, income, structure, age band) — the closest five neighbours in that space, not the same five pages every row links to. The aim is a genuine cross-link graph rather than a star pattern that search engines correctly read as a pSEO signal.

What tax year do these figures use?

2026/27 UK tax year (6 April 2026 – 5 April 2027), England, Wales and Northern Ireland rates. Scottish tax bands are not modelled in this calculation — Scotland has a separate Starter / Basic / Intermediate / Higher / Advanced / Top band schedule that will be added in a future batch.

Why does the optimiser want such a large pension contribution?

Because employer pension contributions dodge three taxes simultaneously: corporation tax (deductible), employer NI (none), and personal income tax / NI / dividend tax (none until drawdown). For this row the optimiser allocates £60,000 to pension — the largest tax shelter available to a director.

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.