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

chodges84

When you hit the 40% limit, is everything you earn taxed at that rate, or just the money above that rate?, and the rest is taxed at 22% (or whatever)?

Thanks.

ctm_2

chodges84 wrote:

When you hit the 40% limit, is everything you earn taxed at that rate, or just the money above that rate?, and the rest is taxed at 22% (or whatever)?

Thanks.

Only the income over the limit is taxed at 40%, not everything. YOu still get the 0%, 10% and 22% bands.

Saeed

ctm wrote:

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.

>>>>>>>> OK, I get it now.

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.

>>>>>>>> I have had other people's assets (money, houses etc) on my name and then transfered back and forth...just holding onto it for relatives etc... But if they start asking me where I got X and Y it will complicate matters. They mayask who owns them and then they may go after them 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!

>>>>>>>>> My fear is of having them on my back for 6 yrs like a guy at my place of work who had similar experience when he was self employed, on paper it appeared as though he had all this cash and a house even though the house wasn't his. He was pursued for 6 yrs and in the end they got very little from him as the more they dug the less they realised he has. But that still didn't stop them hassling him for papers and all sorts for 6 yrs.

>>>>>>>>>> I know it probably sounds rediculous for me to be turning down money, but I'd rather have £1000 less and no hassle rather than getting £600 extra after tax and having to spend that on accountants/ financial advisors/tax planner +++++ hassle

Tim_L

Saeed wrote:

>>>>>>>> I have had other people's assets (money, houses etc) on my name and then transfered back and forth...just holding onto it for relatives etc... But if they start asking me where I got X and Y it will complicate matters. They mayask who owns them and then they may go after them etc

They may ask this anyway. The obvious question here is why you are holding onto these assets for other people, and it it's to do with any form of tax avoidance then any investigation into the other peoples' affairs may cause the IR to come after you - to be honest it's almost impossible to think of any reason for setting up an arrangement like this that is not about avoiding some sort of tax or other liability. Potentially there are very serious consequences indeed. And since it is already costing you money (in terms of the pay rise) to look after assets for other people, then I have to say you're getting a very raw deal, unless someone is compensating you for the losses and the risks you're running. Forget about the IR "going after them": the likelihood is that they will come after you at some point.

And on top of this there are likely to be capital gains liabilities for you if anyone wants to sell one of the assets you are holding for them. You can't gift or transfer houses freely without capital gains liabilities. And you can't transfer ownership of houses without anyone noticing.

This is a can of worms far bigger than the problem of going up a tax bracket, and frankly you should be more worried about getting out of the situation you have been placed in by others than 40% tax - it's quite possible that if the situation unravels the cost to you in terms of fines, back tax, interest and penalties will be much more than your savings.

littld

I'd expect that if you put £1000 in your pension (or whatever amount you think would be taxed at 40%) then you would not pay 40% tax on that amount.

You can keep increasing this as your income goes up and end up never paying 40% tax.

In any case, AFAIK, you don't need to fill out a tax return. I have never done so and no-one has complained.

sarahlouise210

ooooohhhh! Saeed...:eek: you are in it up to your neck I feel. There is only one reason that people will be transferring things into your name and that is avoidance of something. Be it tax avoidance..claiming tax credits..benefits..there has to be a reason. The real reason you are so worried is now emerging. What seemed like a simple favour could now rebound on you. Stop doing this now. HMRC have more information than you can imagine. They are notified of interest details and will have access to other information if they need it. If you do go into the 40% tax bracket you will need to pay extra tax on the interest you have on your savings (whether you get a tax retun or not).Tidy up your affairs now..only have income that is your own and hope that it is all sorted before you do in fact receive a tax return. If any income has been in your name during 2005-6 and you do receive a return you wil need to declare it as your own..you say that you are worried that the HMRC would come after whoever you have been looking after it for but you should be more worried for yourself as you will have committed fraud. Accepting the income as your own and dealing with any repercussions would be the lesser of two evils. I guess you will no longer be having assets transferred to your name ????

HLK

Is it also true that if you go into the tax band of 40% even by £1 then they use that rate against the whole of your pensions contributions ? I sure that's been posted before.

ctm_2

HLK wrote:

Is it also true that if you go into the tax band of 40% even by £1 then they use that rate against the whole of your pensions contributions ? I sure that's been posted before.

No

If you go over the 40% threshold by £1, and make £3000 pension contributions, then you will only get releif on the amount over the 40% threshold, so in that case would get the extra releif on the £1.

deemy2004

Saeed wrote:

ctm wrote:

>>>>>>>>>> I know it probably sounds rediculous for me to be turning down money, but I'd rather have £1000 less and no hassle rather than getting £600 extra after tax and having to spend that on accountants/ financial advisors/tax planner +++++ hassle

You scardy cat...

you don't need an accountant - and whats more you can do it all online - using the tax mans 'easy' to use website which calaculates everythign for you.. really your tax affairs are quite simple since all you will need is your bank / savings statements and P60. once you do it you'l wonder what all the fuss was about.

westernpromise

There could be a relatively innocent explanation, like relatives using his ISA allowances. If they gift you the money and survive 7 years it's yours tax free IIRC.