About to go over 40% tax bracket by £1000 - help on how to avoid it

Saeed

Hi,

I will at the end of the financial yr go over the 40% tax bracket. I don't want to go over it and risk getting a tax return. Last year I managed to decrease my hours and aviod it that way, but this year my employer won't let me do that.

Has any clever soul got any other ideas about how I may be able to stay below the 40% limit???? I am not in the pension scheme at all and haven't been for 4 yrs. Could I join up the pension scheme and chuck in £2000 and will that keep me below. I have no idea!!!

Any help/ideas appreciated

S

Ems!

It is no longer the case that you get a tax return automatically if you are a higher rate tax payer. If your tax affairs are straightforward - ie. just an employment and some savings - as long as savings not over £10,000 ( i think that is the figure), then you shouldn't get one.

crossleydd42

What makes you think that you will have to complete a tax return because you go into the 40% tax bracket? IF you pay via PAYE, it's unlikely.

isasmurf

Let me get this straight - you are prepared to forgo 60% of income you could have taken home just to avoid a tax return. Doesn't sound like moneysaving to me.

MrChips

I agree with the other posters that this is a rather unusual request, but in the interests of trying to answer your question.

Putting it in the pension scheme would seem to be the most sensible solution as that way you aren't actually "throwing money away", rather postponing receipt of it. If you have chosen to forego membership of the pension fund in the past, many won't let you rejoin later, or at least won't let you join without medical evidence that you are in good shape (this is to avoid selection against the fund where people join after being diagnosed with a terminal illness or reduced life expectancy just for the cheap/free death benefits). You will need to check out what the specifics of your fund are.

If it is a defined contribution scheme (which chances are it is nowadays) then this should be more straightforward.

thor

I wish I was rich enough to have to pay 40%

ctm_2

As others have said. Just being a higher rate taxpayer will no longer get you a tax return to fill in.

Even if it did, you get just under 10 months to fill it in. And if you are just employed by one company, have a small amount of interest from banks and building societys, then other than filling in your name, date of birth etc, you only have to complete around 8 or 9 boxes on the return. It's hardly something you should worry about to the extent you don't want to take home an extra £600 pounds!!

sarahlouise210

You are only trying to "get rid" of £2000 so you must only be just going into Higher Rates so you will not get a tax return. Simple PAYE cases do not receive tax returns unless their income exceeds £100,000 (if only) If you claim high expenses you will get a tax return..other than that you do not have to worry. Enjoy your new found wealth..dont worry about it!

Tim_L

Tax returns are very easy to fill in, really. There are detailed instructions, and mostly you will just be copying in information from your P60 - the IR are very helpful indeed if you get stuck. There are some bonuses, including the fact that you can start claiming extra tax relief on Gift Aid. It took me about an hour on a Sunday morning to fill in my forms, no more than that, but I've now been moved off onto the simple form which I think the IR are now using for most people with relatively simple situations.

Also have you taken into account all your allowances and deductions when working out when you will fall into the 40% tax bracket - if you know for certain that you will be paying higher tax then you've done basically all you need to do to fill in the form anyway.

At the limit, you can get an accountant to fill the form in for you and you will still do better than if you give up your salary to avoid filling in the form. In fact I'd be tempted to fill it in for your for half the 60% of the excess - very easy money!

Pension contributions are worthwhile in most circumstances as a way of avoiding the 40% rate in any case, but this is where it's worth having a chat with a IFA to work things through.

Saeed

Thanks for all the replies. I am still a little confused..especially with the pension thing. I have checked and I can join up as I am a spring chicken at 30yrs of age. If I put money into the pension is it still counted as money I have received and therefore counted in the taxable income (ie if all my pay is counted I will go over the 40% by about a £1000) or is it not counted in the earnings?????? (and therefore a potential loop hole for me??)

One fo you guys write that I should be OK if my savings are <10,000, Unfortunately due to persistent moneysaving they are 3 times that!

As for the reason for avoiding a tax form....my sitaution is a bit complex and I'd rather aviod the scrutiny of the tax inspectors, especially listing all my assets, and would rather fore go pay...I will try and ask my employers not to pay me for a month but they will think I am crazy.

Will probably need to see a tax planner I think. Can anyone shed any more light on the pension question I have asked???

ctm_2

Saeed wrote:

One fo you guys write that I should be OK if my savings are <10,000, Unfortunately due to persistent moneysaving they are 3 times that!

It's not the size of your savings that matters, it's the income from your savings/investments. As long as your interest and dividends are below £10000, then you will not get sent a return because of them.

What exactly is it that makes your situation 'a bit complex'? And why worry about assets? You don't list assets on a tax return unless you run a business etc.

As I said before:
1. you won't get a tax return for just going into the 40% bracket.
2. Even if you did get a return, they really aren't difficult, and you get 10 months to fill the form out anyway! Plenty of time to get help (which can be free if you ask on here, or go to your local HMRC office)

I think you must have an irrational fear of anything to do with tax, and quite frankly, I think you are a bit silly if you are so scared of the possiblilty of getting a small form to fill in that you are willing to give up a reasonably large sum of money!