Income Tax: Hmmph!!

zincoxide

I get paid a decent salary and have no qualms with paying income tax. However, what does annoy me is that I get a quarterly bonus and it's eaten up by tax.

For example, this month I'm getting a nice bonus of £3270, plus my wages gives me just over £5k and then the government will be taking £1800 including my NI payment!!!!!!!!!!!!!!!!!! :eek:

I'm co-habiting with my partner and have been refused tax credits as she also works and we don't have kids.

Does anyone know of a way to reduce the amount of tax I need to pay? I'm desperately trying to save a deposit for a house but tax is killing me.

Rant: 'I'm a young man earning a good wage yet the government are not prepared to help me in any way. I get no allowances, cannot afford to buy a house so get stuck paying someone else's mortgage. If I take time off I can't get benefits even though I've never claimed anything else, my council tax stings me even though I'm a student doing a distance learning degree as well as holding down a full time job. I'm getting sick fed up of seeing all my money getting swallowed up by all the stealth taxes imposed now.' Rant over (for now)

So...who has the best (erm...legal) ways of avoiding tax?

BoltonMinx

Hi there,

Why don't you take a look at the cutting tax forum ? Click here. It's packed full of tips, for instance, I claimed back the cost of professional subscription > £100 recently for the cost of a 2nd class stamp

You may also want to look at www.entitledto.com which will give you an idea of what benefits & tax credits you could be claiming, if any.
Good luck

zincoxide wrote:

I get paid a decent salary and have no qualms with paying income tax. However, what does annoy me is that I get a quarterly bonus and it's eaten up by tax.

For example, this month I'm getting a nice bonus of £3270, plus my wages gives me just over £5k and then the government will be taking £1800 including my NI payment!!!!!!!!!!!!!!!!!! :eek:

I'm co-habiting with my partner and have been refused tax credits as she also works and we don't have kids.

Does anyone know of a way to reduce the amount of tax I need to pay? I'm desperately trying to save a deposit for a house but tax is killing me.

Rant: 'I'm a young man earning a good wage yet the government are not prepared to help me in any way. I get no allowances, cannot afford to buy a house so get stuck paying someone else's mortgage. If I take time off I can't get benefits even though I've never claimed anything else, my council tax stings me even though I'm a student doing a distance learning degree as well as holding down a full time job. I'm getting sick fed up of seeing all my money getting swallowed up by all the stealth taxes imposed now.' Rant over (for now)

So...who has the best (erm...legal) ways of avoiding tax?

Robert_Sterling_3

Just refuse to take the bonus.

sarahlouise210

You will pay excessive tax on the month you receive the bonus as you will be paying tax at 40% (The tables they use to work out your deductions will assume this is your earnings every month) As long as your tax code is correct, the following month..and the month after.. you should receive some of the money back as it will be evident that you do not earn £5000 each month. You will receive this in the form of paying less tax than usual. Regarding your rant.. On the income you have mentioned (plus your partners income) you would receive minimal tax credits even if you did have children. As you say you have a decent salary. You are saving to buy a house so taking home less money does not seem an option, however you would pay less tax if you paid more into a pension fund as these payments are deducted before tax is calculated.Unfortunately it is harder and harder to get on the property ladder these days as even a decent salary is not enough to cover a decent mortgage.If you were Self Employed as well as employed..any losses you made on the Self Employment could be set against the PAYE tax you pay and you would receive a refund.

Ian_W

zincoxide wrote: I'm co-habiting with my partner and have been refused tax credits as she also works and we don't have kids.

What the fluking 'ell would you get tax credits for then???????????
If there's a 2 working adults with no kids tax credit somewhere, sign me up quick!!!

MarkyMarkD

Sarahlouise explains the situation correctly.

People often think "it's not worth working overtime" or "it's not worth getting a bonus" as they often suffer 40% tax on some or all of the extra income even though they aren't earning enough in the year as a whole to make them pay 40% tax.

This is particularly an issue if you get your bonus/overtime early in the tax year.

But, as sarahlouise says, you then get the overpayment back in later months - which accentuates the feeling that you paid a lot extra tax in the month you received the bonus/overtime.

At the end of the day, you are only losing around 50% of the bonus in tax/NI, at the worst, and if you don't earn enough to pay 40% tax in the year as a whole the real tax/NI cost is only in the low 30s%. So I don't really see that you have much grounds to complain.

Things like share options in your employer's company can be tax-free, and if you put your bonus into the company pension scheme that would also be tax-free. So there are ways round it, but normally involving not getting the money there and then in your pocket.

nearlyrich

If you earn over the threshold for 40% tax you will have to pay the tax, I need a car to do my job and I get taxed on it, it takes me into 40% bracket and I had to pay 2 lots of student tuition fees and if I didn't have the car I wouldn't have had to. I don't get any tax credits either just when I need them most. If you look at it philosophically you are better off earning enought to pay tax at 40% than working just as hard for minimum wages.;)

Bobsworlduk

Ian_W wrote:

What the fluking 'ell would you get tax credits for then???????????
If there's a 2 working adults with no kids tax credit somewhere, sign me up quick!!!

There is and its called Working Tax Credit. We used to get it when my partner and I were both working part time. It wasn't much but it was a tax credit for 2 working adults with no kids.

withabix

sarahlouise210 wrote:

You will pay excessive tax on the month you receive the bonus as you will be paying tax at 40% (The tables they use to work out your deductions will assume this is your earnings every month) As long as your tax code is correct, the following month..and the month after.. you should receive some of the money back as it will be evident that you do not earn £5000 each month. You will receive this in the form of paying less tax than usual. Regarding your rant.. On the income you have mentioned (plus your partners income) you would receive minimal tax credits even if you did have children. As you say you have a decent salary. You are saving to buy a house so taking home less money does not seem an option, however you would pay less tax if you paid more into a pension fund as these payments are deducted before tax is calculated.Unfortunately it is harder and harder to get on the property ladder these days as even a decent salary is not enough to cover a decent mortgage.If you were Self Employed as well as employed..any losses you made on the Self Employment could be set against the PAYE tax you pay and you would receive a refund.

I don't believe you are correct there with your point on tax tables.

sarahlouise210

iainkirk wrote:

nearlyrich, do you claim tax relief on business mileage? I'm up in 40% land but my tax relief claim takes me back down into 22% land. Mind you, I do a high mileage and end up with a tax allowance of about £11500 pa (ie 1150L tax code).

You cant claim tax relief for business mileage when you are in receipt of a company car !!!!

nearlyrich

sarahlouise210 wrote:

You cant claim tax relief for business mileage when you are in receipt of a company car !!!!

That is true, I have done the own car for business thing too and to be honest the hassle and cost of doing 30k miles per annum in your own car, tyres, windscreens etc it's just not worth it. I just pay the tax and don't think about it too much;)