Diverting £50k of salary into pension fund to claim welfare benefits

gadgetmind

The sooner HMG restrict total household benefits to < median income (£24k before tax?) the better.

I have relatives who've avoided education and qualifications and have instead chosen to have multiple kids with multiple (absent) partners with each dropping just as the last was due to start school.

That we have a system that both the productive and unproductive alike can "abuse" needs fixing, and it needs fixing for both groups.

xylophone

http://www.contracteye.co.uk/contractor-salary-sacrifice-guide.shtml- might be worth a look.

property.advert

YORKSHIRELASS wrote: »

Without getting into the moral debate we are a family who have to live on an income of £12k plus benefits. We have a disabled child (hence why I am not currently working). We receive a total of £920 a month for Tax Credits and Working Tax Credits which I actually think is quite generous. This includes the severe disability element. Your figures do seem quite high but I havent checked them and they may be correct.

Even with Disability Living Allowance, Carers Allowance and Child Benefit our income is far less than £3k a month.

Where it really starts to ramp up is when you have the childcare element. I think that is 70% of £175 for one child and up to £300 for two children. At those numbers, you can easily add another £1000 plus a month to the income.

When the kids start school, childcare will stop and so will benefits for childcare. It is only during these formative years that the figures become so skewed.

Bernie

...no way my wife and I qualify for the child related benefits but I too support the OP.

After a full military career and a bit of luck afterwards, I find myself - courtesy of my pension and jnr exec salary - moved abruptly into the 40% tax regime, matching, at the zenith of my working life, the OP's nice gross salary.

The impact was a sudden and harsh tax demand for the year gone and some on account please.

I went straight into my pay people and had my entire pay and bonus for the rest of that year paid into my (second, company) pension. This resulted in most of the advance tax being refunded and second payment cancelled - and a big drop in income for us! Natch! but we could afford that, I just could not bear the penal tax deductions... and I've continued to do this.

So, the result has been significantly less tax collected from me and considerably less spending in the economy by the wife and me - all round bad karma! For the past 2y6m now I have paid the majority of my salary into my pension simply because half of that investment would have been taken straight off the top. In a few years time (maybe sooner), I'll take 25% back tax-free and get an annuity with the other 75% (of which 2/3 would have gone to the taxman). Like the OP, I too am playing the systems in my own sweet little way because I can.

Missus hated the drop in income until finally, after this year's tax return, my monthly pension has just been jacked up by £300 because of the change to my tax code. Get in!

When the tax regime motivates an upper working class kid (of 60 years) like me to start playing the tax avoidance game in this way, the rule set has got to be wrong. It's no different for the OP. It would be rude not to!

Sorry about the length of my post - could not get that rant off my chest in a few pithy sentances!!!

:beer:

sabretoothtigger

the result has been significantly less tax collected from me and considerably less spending in the economy by the wife and me - all round bad karma!

The negatives you imagine are not quite as bad. Saving money is not that bad, that money will be used in the UK economy in supporting business in some shape or form.
If you had taken the money and spent it, would it really have been just on uk goods, we import most stuff so really the money spent is being sent abroad alot of the time

Plus when save in a pension you stop yourself being an income support case in your old age, people being secure away from welfare system is another positive and the money is eventually spent anyway at some point. Im sure you dont want to save it forever

The tax system deliberately increases pension allowances for people nearer to retiring, I dont think government minds. Alot of pension funds buy up government bonds anyway, so they had better not object

Even when people do avoid 40% tax they still end up paying VAT and fuel duty and all sorts, its not like anyone really gets off that easy

drc

How's this coming along OP?

atush

Bernie wrote: »

...no way my wife and I qualify for the child related benefits but I too support the OP.

After a full military career and a bit of luck afterwards, I find myself - courtesy of my pension and jnr exec salary - moved abruptly into the 40% tax regime, matching, at the zenith of my working life, the OP's nice gross salary.

The impact was a sudden and harsh tax demand for the year gone and some on account please.

I went straight into my pay people and had my entire pay and bonus for the rest of that year paid into my (second, company) pension. This resulted in most of the advance tax being refunded and second payment cancelled - and a big drop in income for us! Natch! but we could afford that, I just could not bear the penal tax deductions... and I've continued to do this.

So, the result has been significantly less tax collected from me and considerably less spending in the economy by the wife and me - all round bad karma! For the past 2y6m now I have paid the majority of my salary into my pension simply because half of that investment would have been taken straight off the top. In a few years time (maybe sooner), I'll take 25% back tax-free and get an annuity with the other 75% (of which 2/3 would have gone to the taxman). Like the OP, I too am playing the systems in my own sweet little way because I can.

Missus hated the drop in income until finally, after this year's tax return, my monthly pension has just been jacked up by £300 because of the change to my tax code. Get in!

When the tax regime motivates an upper working class kid (of 60 years) like me to start playing the tax avoidance game in this way, the rule set has got to be wrong. It's no different for the OP. It would be rude not to!

Sorry about the length of my post - could not get that rant off my chest in a few pithy sentances!!!

:beer:

With all due respect, what you are doing we all applaud. The OP is talking about your tax pounds paying to raise his children when he could afford to do so himself. Saving tax, and claiming benefits on top of saving tax are two very very different things and I am not sure you appreciate that?


I too am interested in how the OP gets on with defrauding the state:D

ffacoffipawb

atush wrote: »

With all due respect, what you are doing we all applaud. The OP is talking about your tax pounds paying to raise his children when he could afford to do so himself. Saving tax, and claiming benefits on top of saving tax are two very very different things and I am not sure you appreciate that?


I too am interested in how the OP gets on with defrauding the state:D

He isn't defrauding the state - what he is proposing is legal. It may not be moral given the mess the Labour Party left this country in when they lost power (1979 all over again), but pension contributions are an allowable deduction for tax credits purposes.

Salary £70k
Gross Pension £50k
Hence ... Income for tax credits purposes = £20k

If you want to blame anyone, blame that one eyed Scottish idiot.

atush

I agree about the scot but you didn't see my grin and humor either?

I obv know what he is doing is legal (so far but we have hopes lol).

jamesd

atush, please go and do an internet search on "libel per se". Accuse someone of a criminal offence and it's automatically libel unless you can prove it was done without malice and is true. Really bad practice to do that because it's an invitation to trouble even if you ignore it being obviously offensive to make such a suggestion.

Seems that was insufficeintly clear: the problem is a failure to be nice to other posters, not the legal risk. Should be obvious that libel isn't being nice.