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

whitevandriver

"No man in this country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or to his property as to enable the Inland Revenue to put the largest possible shovel into his stores".

James Avon Clyde, Lord Clyde, Ayrshire Pullman Motor Services and Ritchie v. IRC (1929) 14 TC 754.

I earn rather more than the OP and plan to hang on to my child benefit also, although am not prepared to chase down the other benefits. I am planning to go part-time as well as continue my £50k gross pension contributions. I also buy a weeks extra holiday annually, put £125 a month into a SIP to buy my companys shares using gross income, pay £243 gross income for childcare vouchers and take a number of other tax efficient flexi-benefits. I also use charity donations to bring town my tax.

Doing all of this should get me down to c£50,000 p.a. Visible to tax man. It is legal and I don't see a damned thing wrong with it.

I wouldn't dream of tax evasion, but tax avoidance - absolutely, it is a rational choice.

atush

I don't see the OP getting back to us, but wish they would.

Still can't see him being 'happy' on so little money.

FLAPJACK

This is an interesting thread indeed.

I remember in that glorious summer of '76 I had found myself unemployed for a short time.
I learnt a useful lesson on the day I first signed on....the chap in front of me was called upto the counter and was asked "Have you worked in the last two weeks?".....he replied "What in this weather!".
Obviously the person behind the glass (in those days there was glass) must have made a remark and I heard the aforementioned chap say "Look love....all I am doing is claiming back the tax I have paid....unlike a fare few you will meet today".

So really this is what the OP is saying...he is "using" the system for his future gain (right or wrongly) as is many who probably unlike him are not working.

If this all comes down to morals .....well just look at the number of MP's who were (are) "using" their system to claim for moats to be cleaned out etc.

Are their (the ones WE vote into power) morals any better than the OP....I think not!

It's probably through their actions that the OP had the idea in the first place and also has a thick enough skin to come here are tell (brag) about it.

It's modern Britain I'm afraid.

jamesd

atush wrote: »

Still can't see him being 'happy' on so little money.

You can save one year then you sacrifice the next, topping up income as required from the savings. Repeat as desired. With the tax credit gain it's more efficient to do it this way than to do it at the same level each year. Or use a 0% for spending card one year and pay it off the next, or whatever else works.

There are some limits to work around though. Say you're using salary sacrifice to cut your income to minimum wage. The highest income at which a healthy single person aged 25 or over can get WTC is about £13,000. If you work 37.5 hours a week for minimum wage your income will be £11,856. At 40 hours a week it's £12,646.40. The first of those means about £484 in WTC, the second about £145.

To get a WTC payment of £1,450 you'd need to get your income down to £9,500 and can't do it with salary sacrifice because it's illegal for an employer to pay less than minimum wage. But you can make extra payments into a pension with after tax money to get the tax relief and the WTC.

There's a good deal more money potentially available for a couple, where an income of £9,500 would produce a WTC payment of £3,405. Even more if children are around.

Sterlingtimes

Reading through the whole thread, some IFAs appear to be guided by moral considerations as well as legal considerations.

Therefore a very moralistic IFA might deliver a poorer deal for his/her client than a very legalistic IFA.

Is it right for an IFA to make moralistic decisions on behalf of his/her client?

AlexPQM

Sterlingtimes wrote: »

Reading through the whole thread, some IFAs appear to be guided by moral considerations as well as legal considerations.

Therefore a very moralistic IFA might deliver a poorer deal for his/her client than a very legalistic IFA.

Is it right for an IFA to make moralistic decisions on behalf of his/her client?

Heh, now you're getting into the whole FSA Code of Ethics. Good luck figuring that one out.

JoeCrystal

Though it is important to bear in mind that next few years when Universal Credits system rolled in, you cannot claim if you got savings more than £16,000 and secondly, you can only disregard 50% of pension contribution instead.

I guess I will lose my WTCs and Universal Credits when I get moved onto then Universal Credits *sighs* Hopefully, I can keep up the pension contribution...

Cheers

Joe

jamesd

Sterlingtimes wrote: »

Is it right for an IFA to make moralistic decisions on behalf of his/her client?

No. A client is entitled to best advice, untainted by what the IFA views as moral or otherwise based on their own religious or other beliefs. I expect an IFA to be instructed to pay redress and possibly be barred from practicing if they let such considerations bias their professional advice without clear instructions from a client that also didn't conflict with their professional obligations to the client.

But it is entirely right for an IFA to express personal opinions here.

Gracchus_Babeuf

This seems like a lot of BS to me. I don't believe the OP could get away with this as I'm sure it would be contested by the authorities once the cotton on to what he is doing.

ffacoffipawb

JoeCrystal wrote: »

Though it is important to bear in mind that next few years when Universal Credits system rolled in, you cannot claim if you got savings more than £16,000 and secondly, you can only disregard 50% of pension contribution instead.

I guess I will lose my WTCs and Universal Credits when I get moved onto then Universal Credits *sighs* Hopefully, I can keep up the pension contribution...

Cheers

Joe

But they've said you will be no worse off under UC than CTC/WTC so even if you have capital they can't take it into account for existing claimants.