Software contractor 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%

Worked example: Software contractor, 44, £220,000 of contract value

Picture a software contractor aged 44 for the 2026/27 tax year, on an inside-IR35 umbrella contract billing £1,000 per day for 220 days. The optimisation goal for this profile is maximum net wealth (treating £1 of pension as £1 of cash today).

Running the engine for this exact profile:

Day rate: £1,000 (220 billable days)
Contract value: £220,000
Net cash to the contractor: £98,266
Pension via salary sacrifice: £33,000
Total deductions through the chain: £88,734 (40.3% effective on contract value)
Break-even outside-IR35 day rate: £1,067/day

The vignette is hypothetical but the numbers are not — every figure above was produced by the same engine code that powers the live BracketMath calculators, run at build time on inputs drawn from a single CSV row.

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 — Management consultant 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

How do I avoid the 60% taper?

For a salaried employee: salary sacrifice into pension. For a Ltd Co director: employer pension contribution. For a sole trader: personal pension contributions (which reduce adjusted net income). The taper-zone marginal of 60% means each £1 of pension contribution effectively costs the saver 40p of foregone cash — the strongest tax shelter the UK code currently offers.

Can I take more than the optimum out of the company?

Of course — every £1 above the optimum simply costs more in tax than it gains in cash. The optimiser tells you the maximum-net-wealth point, not a legal limit. Past the optimum the marginal cost of extraction climbs steeply (60% effective in the PA-taper band, 39.35% additional-rate dividend above £125,140).

Why does the optimiser disagree with my accountant?

Often because the accountant is optimising salary first, pension second, dividend as residual — three sequential one-variable problems. The BracketMath optimiser does the joint problem: every (salary, pension) cell evaluated through the full tax stack, accounting for the four-band salary problem, the £100k taper, the CT marginal-relief band, and the Annual Allowance taper simultaneously. The improvement is typically £2k–£35k/yr at typical income levels.

What happens to my pension at age 55 / 57?

From age 55 (rising to 57 from 6 April 2028 per the Finance Act 2021) you can access defined-contribution pensions. The first 25% of the pot is tax-free (the "Pension Commencement Lump Sum"), subject to the £268,275 Lump Sum Allowance. The remainder is drawable at your marginal income-tax rate — but you can phase it across decumulation years to keep most of it within the 20% basic-rate band.

How much can I put into pension this year?

The 2026/27 pension Annual Allowance is £60,000. Below £260,000 of adjusted income the full £60,000 Annual Allowance is available. Carry-forward of unused AA from the last three tax years is available subject to membership-in-each-year rules.

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.