Software contractor on £187,000

Inside-IR35 Umbrella. Inside IR35. Age 42. 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

£85,629

Pension

£28,050

Effective rate

39.2%

Marginal rate

42%

Step by step: how the engine arrived at the bottom line

The inside-IR35 engine ran the umbrella-deduction stack in the same order an umbrella company actually pays the money out. Here are the steps that produced the bottom line for a software contractor on a £850/day inside-IR35 contract (220 days assumed):

Contract value: £187,000 (day rate × 220 days).
Umbrella fee: £1,500 deducted off the top.
Salary sacrifice (pension): £28,050 taken off pre-tax / pre-NI as a salary sacrifice — by far the most efficient lever inside IR35.
Employer NI: £22,868 on what remains (15% above the £5,000 Secondary Threshold).
Gross deemed salary: the remainder is paid as a salary subject to PAYE.
Income tax: £44,251 at 20% / 40% / 45% on the deemed salary.
Employee NI: £4,702 at 8% main band, 2% above £50,270.
Net cash: £85,629. Net wealth incl. pension: £113,679.

Break-even day rate to match the outside-IR35 equivalent: £922/day.

The numbers, line by line

Day rate	£850
Contract value (220 days)	£187,000
Inside-IR35 net cash	£85,629
Inside-IR35 pension	£28,050
Outside-IR35 net cash	£91,707
Outside-IR35 pension	£28,000
Cost of being inside IR35 (net wealth)	£6,028
Break-even outside-IR35 day rate	£922

Why this scenario is different

Compared to the closest peer profile — IT contractor at £176,000 — this scenario sits £11,000 higher on gross income. That moves net cash by +£4,212, the pension contribution by +£1,650, and the effective rate by +0.5%. The effective rate moves only modestly — both scenarios sit inside the same binding tax band. The break-even outside-IR35 day rate moves from £878 to £922 per day.

Questions this scenario raises

What is the "deemed salary" inside IR35?

It is the figure the umbrella treats as your gross salary after deducting its own fee and employer NI from the contract value. Inside IR35, the contractor does not legally have a separate Ltd Co — the relationship is, for tax purposes, "deemed employment." The deemed salary is what PAYE income tax and employee NI are calculated on.

Is this calculation valid for the 2027/28 tax year?

Only partially. Thresholds (PA, basic-rate, higher-rate, NI thresholds) are frozen through April 2028 per the Autumn Budget 2024. Some rates may change at the Spring 2027 Budget. The figures here are accurate for 2026/27 and will be re-run after any future Finance Act changes — check the published-date footer of this page.

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.

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.

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.

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.