Withdrawl of personal allowance 100k+ and pension contributions

letitcomedown

For the first time in my life, it looks like I might earn over 100k. Of course, this has happened in the tax year where the effective marginal rate has shot up to 60% for the first time in 25 years by withdrawing the personal allowance.

I have some questions.

1) Do P11D benefits in kind count as income for the withdrawl of the personal allowance? I have childcare vouchers above £243 and private health insurance
2) My tax code is still 647. Will my allowance be withdrawn as I go above 100k in the next few months, or will I have to repay the extra tax in my self assessment next Jan?
3) I have a money purchase pension, if I can submit a single contribution to in so that I reduce my income below the 100k threshold? If so, how does that work in practise?

Any help greatfully received!

chrismac1

1. All income counts. All tax-deductible expenses count towards reducing your income below £100k.
2. Self-assessment.
3. Pension contributions will increase the point at which the 40%, 60% and 50% threshholds kick in.

PM for a ready reckoner which can calculate exactly how much pension contribution to make to avoid the 60% hit. This is an especially good time to make an investment in the stock market:

We are now in the 12th US presidency since 1965. In the previous 11, the US market has risen 11 times in the third year, and 8 times in the fourth year, of the presidential term. So far nothing I've seen in the Obama setup suggests he will be any less tempted than the preceding 11 guys to engineer this sort of mini boom.

Cook_County

chrismac1 wrote: »

1. All income counts. All tax-deductible expenses count towards reducing your income below £100k.
2. Self-assessment.
3. Pension contributions will increase the point at which the 40%, 60% and 50% threshholds kick in.

PM for a ready reckoner which can calculate exactly how much pension contribution to make to avoid the 60% hit. This is an especially good time to make an investment in the stock market:

We are now in the 12th US presidency since 1965. In the previous 11, the US market has risen 11 times in the third year, and 8 times in the fourth year, of the presidential term. So far nothing I've seen in the Obama setup suggests he will be any less tempted than the preceding 11 guys to engineer this sort of mini boom.

You must be the exception to the rule because most folks believe that FATCA will lead to huge amounts of foreign investment in the US markets being rapidly withdrawn throughout 2012 in readiness for 2013.

On the UK tax front, the OP needs to learn about the carry forward provisions being introduced in April as these will add flexibility to the payment dates.

chrismac1

"You must be the exception to the rule" yes I totally agree.

In 2000 whilst every Tom !!!!!! and Harry was piling in to tech stocks I was hitting the exit door hard and getting into FTSE 100 income stocks. In 2008 as the last boom reached what seemed to me to be an inevitable conclusion I was not only getting out, I was getting short. The biggest mistake I've made was not getting back in early enough in 2009 so I've missed out on some decent profits as a result.

At the moment due to quantatitive easing - which used to be known as printing money, a term I think is a much better description - most US fund managers are buying which is the one big worry because when they are bullish it is usually time to sell.

But other than that, we've just crossed 6,000 on the FTSE which is 12% lower than its close 10 years ago. We may well be in a rally within a multi-year bear market, but the odds are heavily in favour of a continued rally up to the date of the US election in 2012. Beyond that all bets are off.

MrBeans

letitcomedown wrote: »

Of course, this has happened in the tax year where the effective marginal rate has shot up to 60%

How do you get to a marginal rate of 60%?

MrBeans

MrBeans wrote: »

How do you get to a marginal rate of 60%?

OK, I worked it out. £ number 100,001 gets taxed at 40% but half of another pound now becomes taxable at 40%, so 60% effective rate on pound number 100,001. Crikey - makes pensions contributions a bargain.

letitcomedown

Thanks all. Of course, I need to figure out how far over I go, and that's not yet clear. But yes, it does look like a bargain...

d40eq6

You could also give more to charity....

Gas_Powered_Toothbrush

letitcomedown wrote: »

2) My tax code is still 647. Will my allowance be withdrawn as I go above 100k in the next few months, or will I have to repay the extra tax in my self assessment next Jan?

If you phone HMRC with an updated estimate of yuor income, they can adjust your code and you can pay some of the money owing through PAYE between now and April.

Cook_County

Gas_Powered_Toothbrush wrote: »

If you phone HMRC with an updated estimate of yuor income, they can adjust your code and you can pay some of the money owing through PAYE between now and April.

It is of course much better not to call them but instead put the money in a savings account until next January so you earn a few shillings in interest on the money...

Gas_Powered_Toothbrush

Cook_County in 'not quite grasping the concept of Pay As You Earn' shocker, film at 11.

The best thing to do is to pay the correct tax during the year, it saves delays in either direction. Suppose the tax code was wrong and you were paying too much, how would you react if you called up to get it corrected and HMRC said "We've got until Jan 31 following the end of the tax year to put this right. We'll refund you then."