any tax tip for a newly high rate tax payer?

daxu

Hi,

My company just informed me that they will increase my salary to £46000, which will be in the 40% band.

I have never earned enough before to get into the 40% band. So is wondering if there are any tips in tax saving?

My wife earns 20k, and have a 6 year old child. We bought this year's cash isa and have some small savings. We used the child care voucher to pay for my daughter's after school club.

My company has a pension, which I do join in. So not sure I can do more?

Many Thanks

Jerry

dzug1

Remember you will only be paying 40% of that part of your salary that is in the 40% band - not on all of it.

A surprising number of people just don't seem to understand that.

Extra pension contributions might be a way of reducing the amount paid at 40%.

opinions4u

Some of these won't make you better off in your pay packet but may indirectly improve things....

1) Extra pension contributions (company may match it)
2) Gift Aid any charitable donations you would normally make
3) Maximise cash ISAs and consider stocks and shares ISAs (but don't automatically do them)
4) Move savings in to your partner's name
5) Choose a company car with CO2 output of 99 or less
6) Claim any allowances for business mileage or uniform cleaning etc not covered by your company
7) Enjoy the pay rise. Well done!

My only objection with higher rate tax status is the assumption from others, especially politicians, that you are automatically loaded.

Prepare for the loss of child tax credits and child benefit - perhaps saving this amount each month now ahead of each of these being withdrawn.

It is possible that making significant pension contributions could help you to retail child benefit when the changes finally come in - but wait and see what your income is and what the rules are at the time before making a poor decision!

John_Pierpoint

Lots of people make life difficult for the payroll department in March.
At the end of February work out what will be your tax position for the year and bung some into your company administered (?) pension fund.

If you can avoid becoming higher paid, you should be able to avoid the joys of self assessment ( a calculation you can do on the back on an envelope but that is required in a format dictated by HMRC).

I am assuming that your other sources of income are relatively simple and tax exempt (eg ISA's) or taxed at source for standard rate or 20% or 10% (standard rate as applied to dividends).

thenudeone

John_Pierpoint wrote: »

If you can avoid becoming higher paid, you should be able to avoid the joys of self assessment

If your tax affairs are simple (and you earn under £100k I think) you will not need to complete a tax return even if you are a higher rate tax payer but it will be HMRC that decides, not you.

daxu

many thanks everyone.