Software contractor on £220,000

Personal Ltd Co. Outside 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

£93,567

Pension

£60,000

Effective rate

30.2%

Marginal rate

33.8%

The four tax mechanisms acting on this income

For a software contractor at £220,000 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 £220,000 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 £93,567 of net cash plus £60,000 into a pension, against £66,433 of taxes / NI / fees lost through the chain — an effective rate of 30.2%.

Where the optimal extraction sits

Corporation tax: £37,325 on £155,000 of post-pay profit.
Employer NI: £0 on the £5,000 salary (15% above the £5,000 Secondary Threshold).
Employee NI: £0 on the same salary (8% main band, 2% above £50,270).
Income tax: £754 on the salary (rUK bands, after personal allowance tapered above the £100,000 threshold).
Dividend tax: £28,354 on the £117,675 dividend (8.75% / 33.75% / 39.35% bands, stacked above salary).

The numbers, line by line

Optimum salary	£5,000
Optimum dividend	£117,675
Optimum pension	£60,000
Net cash (optimum)	£93,567
Net wealth (cash + pension)	£153,567
Rule-of-thumb net cash	£120,064
Rule-of-thumb net wealth	£120,064
Saving vs rule of thumb	£33,503
Effective rate on profit	30.2%
Marginal rate (next £1 dividend)	33.8%

Why this scenario is different

Compared to the closest peer profile — Cybersecurity 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 optimiser shifts £0 of the extraction out of the dividend slice, and £0 out of pension contributions.

Questions this scenario raises

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.

Does taking a £nil salary cost me a State Pension year?

Yes, if you take £0 salary and pay no Class 2 (sole traders) or Class 3 (Ltd Co directors) you will not earn a qualifying year for that tax year. Take at least the Lower Earnings Limit (£6,500 in 2026/27) as salary to earn a qualifying year automatically. Most directors take £12,570 (full PA) anyway, well above the LEL.

Where does the BracketMath engine source its rates?

Income tax / NI / CT / dividend rates come from HMRC's published 2026/27 rate tables (gov.uk/government/publications/rates-and-allowances-income-tax). Pension rules come from FA 2004 and the FCA's consumer guidance. Historical investment returns used in the Monte Carlo engine come from a 125-year UK gilt + UK equity series stored in src/data/historical-returns.json. Every constant carries a source URL in the source code.

Are the numbers on this page computed live or pre-rendered?

They are pre-rendered at build time by running the BracketMath engine code against the inputs for this specific row. That means: zero JavaScript on the page for the calculation itself, the figures cannot drift if the engine is changed, and you can verify them by running the corresponding calculator with the same inputs.

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.