Only just in higher rate bracket- minimising?

littleweasel

Hi there,

I recently got a pay rise which will kick in later this month. Upon plugging in my details to listentotaxman.com to get an idea of the breakdown, I noticed that because of various deductions, I will only just be paying higher rate.

My gross salary will be £46k pa, but I have a lot of student loan outstanding (repayments will be about £226 a month). From April 2013 my pension contributions will be 6.67% (£250ish a month). I don't get any benefits which change my tax code. I think the changes to the tax free, basic rate and higher rate thresholds will more or less cancel themselves out as far as I'm concerned.

Anyway, what this means is that only £200 or so of my actual income goes in higher rate tax (which is great!) and I am wondering if there is a smart way of minimising this further. In particular, I'm thinking about doing something like cyclescheme, which allows you to claim tax relief on the purchase of a bike to use to cycle to work. But are there other schemes like this I don't know about? A bike might be useful in the future, particularly if I move further away from work, but there's no point in spending money to get tax relief on things I won't actually need or use right now. I guess what I'm getting at is that since I'm going to be paying 40% on a small bit of my income, is it sensible to look at ways of getting tax relief on that small bit?

This is also a completely stupid question but I wonder what will happen to my tax payments from now until the end of the tax year. The pay rise is not enough to bump me into higher rate this financial year, because the whole year will still be well below the threshold. Does this mean that my take-home will be higher in February and March than in April?? (idiot question)

Basically, I don't know a whole lot about this stuff and am looking for ways to make my money work hard for me as well as vice versa

nomunnofun

In 2013/14 your taxable pay will be £43000 which is £46000 less your pension payments. This means that you are £1550 into the higher rates - the student loan repayments do not affect this. If you were to pay around £105 net per month into a personal pension scheme, £1260 per annum, this equates to a gross contribution of £1575. this will keep you a basic rate taxpayer.

littleweasel

Thanks, that is helpful. I didn't realise student loan repayments worked differently to pensions for tax purposes.

I have two pension schemes - one public sector and one private sector with a bit in it. I'm not sure I want to pay any more into the public sector scheme as these are being progressively adjusted for the worse ('gold-plated', my a$$) and if it's like this now who knows what it will be in 40 years when I retire.

I might think about transferring my old private sector pension, which doesn't have much in it and is performing poorly, into a new personal pension scheme (would I be able to keep my previous employer's contributions if I did this?). And then doing as suggested. I guess it depends on how tricky it is to set up. I probably should also consider that I won't be able to escape higher rate forever!