Avoiding 40% tax rate

pchelpman

dzug1 wrote: »

Or GIVE the excess to charity.

This could easily reduce the impact of the 40% tax band as the total of your charitable donations is added to your basic rate band to uplift it.

dzug1 wrote: »

many of them are as grasping as MPs

In these hard times they have no choice.

dunstonh

I don't have much confidence in pensions at all after watching my parents lose alot, in my opinion I'd be better saving £10 a month till i retire and then walking to the bookies the day I retire with the savings and pop it on a horse with a better outcome as I've still got 44 year to retire

Thats just you not understanding how they work. Pensions dont make or lose money. They are not an investment. They are just a tax wrapper to contain your savings or investments which you choose to place in it. If you place a deposit account in a pension you cant lose money. You wont make much but you cant lose it. It you go gung ho high risk then you could lose a lot or gain or lot. Or perhaps taking a more balanced approach with a spread of assets is the best option.

To say you dont have faith in pensions because your parents lost money is a bit like saying you wont drink any more because you dont like tea and totally disregarding the fact there are other drinks.

Even if your parents did take a higher risk approach, losses only tend to be short term. Investments do zig zag. Sometimes up, sometimes down. You cant have the good all the time, sometimes you have to have the bad. You average out these ups and down and make sure the investments are rebalanced to ensure you keep the gains from the profits and reinvest in the bad times.

mitchaa

I dont get this thread, the 40% tax band is being moved up by over £3k come April.

You have admitted you are close to the 08/09 40% band with the amount of OT you have been doing, the 09/10 allowance will allow you a 7-8% annual payrise on last year without going into the 40%.

Unless you pay any extra into a pension, then you will go into the 40% tax band, so what?

You do realise though that when you go into the 40% tax band you only pay 1% NI instead of the 11% you pay with 20% taxation so you are not that much worse off especially if we are only speaking a thousand pound or 2 into the 40% band. You will be a few pounds per month worse off, no big deal. (I say worse off, but of course you will be better off as you'll be earning more)

Your contributions overall will still be below 30%, to pay a true 40% taxation of your wage, you need to be earning IEO £650k

UK_tax_expert

This thread was titled avoiding 40% tax rate and there are some things that have not been included yet.

outkastchris doesn't say if he is married or have other income such as savings etc.

Some options to name a few include:
i) Transferring income to your wife.

ii) Arranging with your employer for them to pay for some items that you would otherwise pay for out of post-tax income. This way you only pay the tax not the item.

iii) The newer flexible pension arrangements really are superb. The government should not have called them pensions because of the bad history. Your pension can be as simple as a deposit account and not only does the deposit grow tax free but you can draw 25% tax free lumps sums from aged 55 and before that age if you really need the cash flow can secure loans on it.

iv) As a normal employee hitting 40% there are a few things you can do but employees are quite restricted. If you could diversify your income sources you can take advantage of CGT tax free amounts and lower investment income tax rates and setting up a business allows greater scope to invest pre-tax income rather than post-tax all the time.

This is a website about "Money Saving" so consider how much money you can save if you speak openly with the experts. Tax advisers and Financial advisers etc. Take advice and get it right first time rather than mull and wait and do nothing. I know from my experience that 99% of the time a small piece of my advice results in greater tax savings and peace of mind.

Hope this helps.

FFP

Forgive my ignorance UK Tax Expert. but how does transferring income to his wife reduce his tax bill ? Surely the transfer can only occur post-tax ? Or is there a way of doing it pre tax ??

CLAPTON

FFP wrote: »

Forgive my ignorance UK Tax Expert. but how does transferring income to his wife reduce his tax bill ? Surely the transfer can only occur post-tax ? Or is there a way of doing it pre tax ??

forget it UK Tax expert is a spammer

dzug1

FFP wrote: »

Forgive my ignorance UK Tax Expert. but how does transferring income to his wife reduce his tax bill ? Surely the transfer can only occur post-tax ? Or is there a way of doing it pre tax ??

You arrange that the source of income (eg savings) belongs to the wife rather than yourself