40% Tax Liability

martinsurrey

gadgetmind wrote: »

BTW, I also find it bewildering that someone would begrudge someone in the public sector a perfectly reasonable salary or object to them trying to avoid paying a huge wodge of tax by saving for their old age,

Not objecting to the wage, not objecting to the tax minimisation, objecting to the finding of paying 40% tax sickening.

ChopperST

Martin I clearly haven't worded my original post well, sickening and gladly are clearly not the same thing. The jist of my post was to limit my tax liabilities, perhaps I should have kept the emotion out of my post as to not be ambiguous.

I guess my point is my day job takes just me over the 40% threshold, I then earn a (relatively) small amount extra through self employment. Knowing that 40% and more when you factor in class 4 NI contributions are being deducted is a significant chunk of the extra income I am earning. Its alot of extra work for not alot of reward. I appreciate that I am lucky and earn a good salary compared to the average and the tone of my original thread may be disrespectful to those earning less.

Thank you for your helpful comments however.

My wife is already a director of her own company and pays herself a salary and a dividend would this have an implication wrapping her up in my limited company? I currently file my return as a sole trader.

martinsurrey

ChopperST wrote: »

Martin I clearly haven't worded my original post well, sickening and gladly are clearly not the same thing. The jist of my post was to limit my tax liabilities, perhaps I should have kept the emotion out of my post as to not be ambiguous.

Thank you for your helpful comments.

My wife is already a director of her own company and pays herself a salary and a dividend would this have an implication wrapping her up in my limited company. I currently file my return as a sole trader.

I think that escalated a bit too fast!

We are both to blame for poorly worded posts, and I apologise for mine, but I do stand by the sentiment, paying tax shouldn’t be considered in any way sickening, without 40% tax payers the country would be on it knees.

Is your wife the only director? Could your work be made part of that company, or a subsidiary, a family conglomerate!

opinions4u

martinsurrey wrote: »

The overpayments would come out of post tax income; OP is interested in minimizing tax.

While seeking to minimise tax (legally) makes sense, paying down debt gives an absolute guarantee on return without risk. Stick capital in a savings account and have a 40% tax liability on the interest earned. Pay capital off a mortgage and pay no tax on the interest saved.

An offset mortgage is an option.

ChopperST

Agreed.

Obviously I provide a health care service and she is a self employed recruitment consultant in the aerospace sector, would be quite a tenuous link to amalgamate the two?

ChopperST

opinions4u wrote: »

While seeking to minimise tax (legally) makes sense, paying down debt gives an absolute guarantee on return without risk. Stick capital in a savings account and have a 40% tax liability on the interest earned. Pay capital off a mortgage and pay no tax on the interest saved.

An offset mortgage is an option.

Our mortgage allows 10% repayment of capital per year at present so I do see this as an option. Whilst the funds cannot be drawn back down they can be used to take a payment holiday to the value of the overpayments which may come in handy as we are planning a family.

Perelandra

While I cannot add to the above in terms of the taxes, one point in your original post:

S&S ISA partly funded this year with a FTSE All Share Tracker

If this becomes a significant part of your wealth, you may want to consider diversifying this.

martinsurrey

ChopperST wrote: »

Agreed.

Obviously I provide a health care service and she is a self employed recruitment consultant in the aerospace sector, would be quite a tenuous link to amalgamate the two?

nothing to say a company cant do 2 very different things, the tax treatment of them is a bit more complex, but not impossible.

Hinduja Group do both commercial explosives and back office banking IT.

ChopperST

Perelandra wrote: »

While I cannot add to the above in terms of the taxes, one point in your original post:

S&S ISA partly funded this year with a FTSE All Share Tracker

If this becomes a significant part of your wealth, you may want to consider diversifying this.

Currently <10% the majority being held in property, pension, and cash at present.

lisyloo

Stick capital in a savings account and have a 40% tax liability on the interest earned. Pay capital off a mortgage and pay no tax on the interest saved.

Guys you still need to DO THE MATHS.
It's a helpful discussion point to raise but there is no guarantee that one option is better than the other.

For example I have a savings account that is better than my mortgage even after 40% tax.

I pay 40% on some of my income because I am not prepared to put more into my pension at the moment (for reasons already raised) and I don't want to get into any of the complex risky vehicles either.

BTW - if National savings bring out any index-linked savings certificates those are/were a no-brainer however they are currently withdrwan from sale.

Being in a similar position I don't think there are any easy options you've missed.