How to Cut Tax on £90k pa Income ?

thequant

Hi All, I've been offered a new position for £90k pa, this is a big jump from my previous wage of £60k pa.

Although gross this seems like a big jump, once tax is taken into account the net differnce in pay is a lot less. And maybe a factor in wether I take the position or not.

Anway what are the best and main ways to cut tax on this income ?

So far all I have is to put 5% of my salary into my pension as this will be matched by the employer and i can claim tax releif on this.

Also I will put in the max allowed into my ISA (both cash and shares)

My "running costs" are 20k a year, £10k a year rent, £5k bills, £5k Luxuries.

I have no debt and am aiming to save as much as possible tax efficently.

I live with a partner who is disabled and unwaged, although he claims a pension of £50 a week and £70 a week DLA.

What other ways are there to cut tax to allow us to save more efficently ?

Randvegeta

Is this through employment or contracting? If under employment and under paye, not sure there is much that can be done..

thequant

Randvegeta wrote: »

Is this through employment or contracting? If under employment and under paye, not sure there is much that can be done..

Under PAYE

Randvegeta

Doubt there is any significant you can do. I'm sure there are others on the board who have a few ideas about certain allowable deductables, tax credits and what have you. I have a few ideas how you can make your 90k go further as a self employed contractor . But not for PAYE. Sorry

ceeforcat

With regard as to your decision as to whether you take the position or not:

You gross will increase by £30000 per annum, your net by £17400 per annum or £1450 per month. That is a lot to give up. If you do not take up this position, in my eyes you will have £1450 per month less 'to save'.

Seems a no brainer to me. Your pension provision is low however. Can you take out an AVC?

xylophone

http://www.direct.gov.uk/en/Pensionsandretirementplanning/Companyandpersonalpensions/Startingacompanyorpersonalpension/DG_10026927
http://www.hmrc.gov.uk/individuals/giving/gift-aid.htm

DreamerV

Would paying more into your pension be an option, to effectively bring down your level of taxable income? Maxing out ISAs is good, however you'll be paying into them after tax is already taken on your wages - so that is an aside to your salary. That's more about the earnings you make from your already once-taxed earnings.

Only thing is that I don't know how beneficial putting large amounts into a pension is longterm - as I assume you'll just be taxed when you retire, probably still at the higher rate. Although if it increases the lump sum you can take tax free later it might still be worth it.

These are just me thinking out loud as I'm interested in learning about the subject. I hope you find a solution.

CLAPTON

DreamerV wrote: »

Would paying more into your pension be an option, to effectively bring down your level of taxable income? Maxing out ISAs is good, however you'll be paying into them after tax is already taken on your wages - so that is an aside to your salary. That's more about the earnings you make from your already once-taxed earnings.

Only thing is that I don't know how beneficial putting large amounts into a pension is longterm - as I assume you'll just be taxed when you retire, probably still at the higher rate. Although if it increases the lump sum you can take tax free later it might still be worth it.

These are just me thinking out loud as I'm interested in learning about the subject. I hope you find a solution.

if the OP puts only 5% into the pension then it's unlikely to be retiring and paying 40% tax



the OP should also bear in mind that their deductions are already 20% (tax ) and 12% NI making 32%
on the 90k their deductions will be 40% tax and 2% NI i.e 42%

I can't seriously believe that difference in tax will influence the decision to take the job

mulronie

There's nothing too creative you can do since you are on PAYE, but two biggies to think about:

Pension - you may be able to make AVCs (additional voluntary contributions) to your pension over and above the 5% you currently pay. Your employer matches up to this 5%, but there's likely nothing stopping you paying more yourself.

Share schemes - If your employer is a listed company, they will probably have tax-efficient schemes in place to allow you to buy shares from your gross income (possibly with matching)

Sophie22

if only had that worry....lol

thequant

DreamerV wrote: »

Would paying more into your pension be an option, to effectively bring down your level of taxable income? Maxing out ISAs is good, however you'll be paying into them after tax is already taken on your wages - so that is an aside to your salary. That's more about the earnings you make from your already once-taxed earnings.

Only thing is that I don't know how beneficial putting large amounts into a pension is longterm - as I assume you'll just be taxed when you retire, probably still at the higher rate. Although if it increases the lump sum you can take tax free later it might still be worth it.

These are just me thinking out loud as I'm interested in learning about the subject. I hope you find a solution.

This is as far as I have got, i.e. pensions and ISA's. in the ISA v Pension debate, the general consensus seems to be max out employers contributions first, then max out ISA's contributions.

However I'm going to have a disposable income beyond this, so looking for other tax efficients vehicles to park my money.