Taxable benefits different tax rates

jc1982

My wife and I are recently married currently expecting our first child. As money is going to be tighter we need to think about all our income and outgoings a bit more!

I pay 40% tax whilst my wife pays 20%. We both work for companies which offer flexible benefits (such as healthcare, DC pension schemes).

Is my logic correct in saying that, in order to maximise our joint income, my wife should pay as much as possible where there is a tax cost (e.g. health/dental insurance) and I should pay as much as possible where there is a tax saving e.g. childcare vouchers, pension contributions??? Does the maths work here or is there no impact on our joint position?!

Many thanks

CLAPTON

depends whether the benefits are 'joint' or 'single'.

as that would mean presumably that you had a very good pension and your wife had none

and she had excellent health insurance whilst you had none

jc1982

Hi Clapton, sorry, yes I am assuming that the healthcare is for the family.

I see your point with regards to the pension - I am assuming that when the pensions are paid we are still married and it goes into our joint income. I think childcare vouchers are a more immediate concern - am I right in thinking that they will be 'cheaper' for both of us if paid for from my salary?

CLAPTON

for childcare vouchers you receive tax relief at the highest rate so it would be advantageous for the 40% tax payer to pay these.

however for pension I would recommend both people contribute especially if the company also makes a contribution.

if health care provides for partners too then it would make sense for the 20% payer to pay these

Savvy_Sue

Of course you can both claim childcare vouchers.

Nicola_Ed

CLAPTON wrote: »

for childcare vouchers you receive tax relief at the highest rate so it would be advantageous for the 40% tax payer to pay these.

however for pension I would recommend both people contribute especially if the company also makes a contribution.

if health care provides for partners too then it would make sense for the 20% payer to pay these

I think the higher rate tax relief was withdrawn from 6 April 2011?

CLAPTON

Nicola_Ed wrote: »

I think the higher rate tax relief was withdrawn from 6 April 2011?

my understanding is that the limit is lower for higher rate payers.

however, it highlights the need for the poster to fully understand the details of the schemes available and not let the tax tail wag the dog.

jimmo

http://www.hmrc.gov.uk/manuals/eimanual/EIM16053.htm