Unsure - Pension or OP

atush

company car, free fuel and private health care.

What dies the value of this add up to in total?

The new rate for HRTax is 41K somthing, not sure of the exact figure but no where near 32K.

xylophone

http://www.hmrc.gov.uk/rates/it.htm
http://taxaid.org.uk/situations/employee/what-your-paye-code-means-continued
http://www.hmrc.gov.uk/incometax/relief-pension.htm
http://www.thesalarycalculator.co.uk/salary.php

xylophone

Salary sacrifice? http://www.moneywise.co.uk/work-wages/tax/reduce-your-tax-bill-salary-sacrifice

Littld_2

Watch out about the tax allowance. People assume that it's 42K before you start paying 40%. I earn less than 42K but will pay 40%.

If you have a small tax allowance, say £1000, them you only need to earn £33,000 before you start paying at 40%. This is often the case if you have a company car or medical insurance provided etc. The salary sacrifice doesn't change that, but might give you more options. You could decide to avoid 40% tax by putting more into your pension contributions.

I would add that whatever you save is still going to be taxed. People forget that while it is saved tax free, it is taxable when you receive it. This means that is it goes up a lot in value you will pay tax on what you saved plus whatever you gain. You can hope that your annual income in retirement is below the allowance to avoid paying tax but there are a few decades for a future government to bring in different tax rules.

I'd add that you need to check the charges on the scheme - pensions are notoriously high in fees sometimes.

Yorkie1

[QUOTE=Littld;60479793]I would add that whatever you save is still going to be taxed. People forget that while it is saved tax free, it is taxable when you receive it. This means that is it goes up a lot in value you will pay tax on what you saved plus whatever you gain. You can hope that your annual income in retirement is below the allowance to avoid paying tax but there are a few decades for a future government to bring in different tax rules.
[/QUOTE]

Unless it is in an ISA wrapper, of course. In which case there is no tax at any point.

kidmugsy

Ben- wrote: »

... due to company car, free fuel and private health care.
Hasn't the 40% reduced to 32k?

What on earth was the point of claiming you make £32k but censoring the fact that you also get paid with a car, fuel etc?

jamesd

Definitely cut out the mortgage overpayments. The loan is almost certainly costing you more than the mortgage interest so getting rid of that with overpayments will benefit you more. You might see if you can get a 0% for purchases credit card, spend on the card and put the spending as overpayments on the loan to save the interest on that more quickly.

Do get started on the pension even if at a low rate. But while doing that you do need to accumulate an emergency fund that eventually needs to be at least three months of spending, better a year if you can get there.

Find out whether the pension is by salary sacrifice, a good thing, or not. If it is by salary sacrifice it'll reduce your pay reported to HMRC by your employer and you'll automatically get all of the tax relief you're due at whatever rate applies. If it's not salary sacrifice tell HMRC the amount paid in after basic rate tax relief has been added.

With a child on the way your finances will be put under pressure so now's a good time to be trying to get rid of borrowing particularly.

Littld_2

Yorkie1 wrote: »

Unless it is in an ISA wrapper, of course. In which case there is no tax at any point.

There is tax before investment - ISAs are not free of income tax.

dunstonh

Littld wrote: »

There is tax before investment - ISAs are not free of income tax.

Any income generated by them is not subject to income tax. Any growth is not subject to capital gains tax.

So, you are wrong. I suspect I know what you are getting at but not all wealth generated is subject to income tax.

Littld_2

Let me make it clear - I don't think I'm wrong. The post I responded to (Yorkie1's) said there was no tax at any point. I'm merely pointing out that unless it is unearned then tax will have been paid on it when it was earned. If you compare ISA to pensions without taking it into account the income tax liability then you're missing something. Do we now agree?