Net Income/ pension.

joeblack066

Hi all,

I earn some of my income PAYE through sessional work, and some of it S/E Sole trader. There is a possibility that I may get to the next tax band threshold (:eek:) (I find this amazing but am trying to get my head round it!) and so need to ask - if I paid into a pension scheme (which at present I don't have) and took my earnings back down to under the higher bracket, would that be correct, declaring the net income as AFTER the payment into pension plan? And are there pension plans available that accept variable deposits into them?
Thanks for the time, I have never had to contemplate tis kind of thing before! :-)

chrismac1

yes it is true - but note that 43,875 of taxable income is where 40% tax begins, and there are other things - such as Gift Aid donations - which can also bring you back down. Plus investing in a pension should never be done solely on tax grounds, especially given the proliferation of utter rip-offs in this sector in the past 25 years in the UK.

The three most important things to ask a pension provider, in order of importance, are:

1. What are your charges?
2. What are your charges?
3. What are your charges?

This assumes they are all properly regulated and hence you're not going to be left high and dry if they fail. Charges are critical to performance, unless you beleive you can identify in advance who will be top of the pensions league table in 10 years time or whenever you retire.

My own personal choice is Hargreaves Lansdown' SIPP package - easily visible minute by minute on your PC, low charges which are fully visible, and a huge range of potential investments. Personally I invest directly in shares and UK Government stock, but if you want to go to fund managers the HL "Top 150" is in my view as good as you are going to get in the UK. Fidelity would be another top option, especially for their low-cost index trackers.

joeblack066

Thx so much Chrismac! Can I ask where the £43875 figure comes from, as all the sites I've looked at still seem to say £37401. SO confusing!

Mikeyorks

joeblack066 wrote: »

Can I ask where the £43875 figure comes from,

You add your Personal allowance (£6475?) to the top of the 20% rate band (£37400) ......... ergo you don't go to 40% until after £43875 :

http://www.hmrc.gov.uk/rates/it.htm

Hargreaves Lansdowne are excellent for DIY investments ...... as they rebate a lot of charges. But their 'Wealth 150' needs to be taken with a pinch of salt. A consistent complaint over on the 'Savings & Investment' forum is that they consistently push products with not too much merit. You need to do your own research on Funds. But their site does contain a lot of info about their SIPP.

http://www.h-l.co.uk/

joeblack066

Mikeyorks wrote: »

You add your Personal allowance (£6475?) to the top of the 20% rate band (£37400) ......... ergo you don't go to 40% until after £43875 :

You can tell how new i am to all this can't you......I didn't realise that the rates were applicable to TAXABLE income, I thought it was just income! I'm learning so much from you guys!! Thx :-)

jimjames

chrismac1 wrote: »

My own personal choice is Hargreaves Lansdown' SIPP package - easily visible minute by minute on your PC, low charges which are fully visible, and a huge range of potential investments. Personally I invest directly in shares and UK Government stock, but if you want to go to fund managers the HL "Top 150" is in my view as good as you are going to get in the UK. Fidelity would be another top option, especially for their low-cost index trackers.

I'd echo the HL SIPP option, just moved both my pension and my wife's to HL. Their service has been fantastic and the charges are a breath of fresh air compared to other pensions products I've had in the past. If only they were available when I started work in 1991 I'd have avoided losing most of my first year contributions in charges!