Mitigating Higher Rate Tax

opinions4u

I suspect I already know the answers, but this forum does have a habit of throwing up an occasional gem!

I'm going to earn enough to pay higher rate tax this year. The new company car and pay increase will tip me over the limit, together with the reduction in where the 40% band kicks in.

Action Already Taken:

- Maxed out my cash ISA.
- Increased my pension contributions.
- Choosing an eco-friendly car (albeit a diesel for higher MPG).


Action Under Consideration:

- Index-Linked Savings Certificates.
- Transferring taxable savings in to Mrs o4u's name (basic rate taxpayer).
- Stocks & Shares ISA (not sure my risk profile is quite suited to this at the moment, due to son being 6 years off university, but could consider lower risk funds).
- Selling my gazillions of LBG shares worth a now pitiful amount and buying them back within a self-select ISA (or possibly choosing other companies to invest in) - not urgent due to lack of dividend.
- Costing all business mileage and charging back anything not covered by expenses to my tax code.


Action Considered & Dismissed:

- Working from home one day a week and claiming an allowance for heating / lighting (apparently I can't do this if I choose to work from home).
- Premium Bonds
- Fixed rate bonds from NS&I due to awful rates!


Is there anything else that I've overlooked?

yelf

offshore bonds?

TM1976

From action already taken:

Increase pension contributions - more. If you don't need the cash it's the most tax efficient option.

CLAPTON

I'm sure these may be good things to do but what has 40% tax to do with it... were they good things to do before

don't let the tax tail wag the dog.

do you anyway invest in S&S if not why start now?

and remember today your marginal deductions are 20% tax plus 9.4% NI i.e 29.4%

afterwards tax is 40% NI is 1% so total 41%... worse but not as bad as many think

Mikeyorks

CLAPTON wrote: »

I'm sure these may be good things to do but what has 40% tax to do with it... were they good things to do before

I had intended to respond to the original - but got sidetracked. And was intending to say - in a couple of pages - what you have succinctly condensed to a sentence!

opinions4u

CLAPTON wrote: »

I'm sure these may be good things to do but what has 40% tax to do with it... were they good things to do before

don't let the tax tail wag the dog.

It's a fair call. On the cash ISA, it wasn't a good idea before (the net easy access rate I was getting was higher than the gross ISA rate) but that now changes.

do you anyway invest in S&S if not why start now?

I have done before, and don't at the moment. As I already have non-cash investments via pension and shares, and a likely call on cash in 6 years, I am reluctant to move savings from cash to equities.

and remember today your marginal deductions are 20% tax plus 9.4% NI i.e 29.4%

Or even 31%!

Thanks to those who've replied. It does look to me like I'm considering the right things and that I've not overlooked the blindingly obvious.

One other thing that I'm likely to do is to consolidate the numerous savings accounts I hold. Partly to maximise interest, and partly to reduce the amount of paperwork I need to keep to complete a tax return.

It's also strange that getting a pay rise plus car reduces my take home pay!

yelf wrote: »

offshore bonds?

If I understand correctly, this merely defers the tax liability. Is it something that you can expand on?