40% Tax Liability

gadgetmind

grey_gym_sock wrote: »

when the salary alone reaches higher rate, the marginal tax rate falls again to 42%.

Only to rise again later, and then to drop briefly, and rise yet again.

It's all ridiculously complicated and needs sorting out.

tushingham

racing_blue wrote: »

I'm intrigued that you started paying into a pension scheme aged 21- presumably this was at least a couple of years before you graduated from medical school?

He never said he was a doctor racing blue. I think that was just an example re public workers and tax.
Probably a physiotherapist?

T

innovate

tushingham wrote: »

He never said he was a doctor racing blue.

ChopperST did say that he "may well be the doctor that is on duty the day you get carried into A&E......" so it isn't far-fetched to assume he is a doctor?

(Though I do hope he isn't a doctor - what, with a nick like ChopperST!!!!)

bigadaj

Though medicine is supposed to be a vocation of course......

ChopperST

No I'm not a doctor. I'd have to have started medical school at 16 to have graduated at 21! I was simply providing an example to martinsurrey of an example.

bigadaj

innovate wrote: »

ChopperST did say that he "may well be the doctor that is on duty the day you get carried into A&E......" so it isn't far-fetched to assume he is a doctor?

(Though I do hope he isn't a doctor - what, with a nick like ChopperST!!!!)

That's an ideal handle for a surgeon surely.

racing_blue

Sorry ChopperST I misunderstood. I thought it might have been possible for you to have started contributing to a different scheme aged 21 and then had a career change, or maybe if you had had some sort of industrial sponsorship through university.

Anyway, the reason for seeking to clarify was to do with the tax-efficiency of making additional pension contributions in your early 30s, if there is a chance you may later hit the lifetime limit. I suspect this could well apply to a Consultant in Emergency Medicine earning more as they get more senior, though am not sure. I guess could apply to people in your job too?

My concern is that you earn highly, work for a lot of years (eg I think you are talking about 47 years?), and have an defined benefit occupational scheme. The notional value of these schemes is worked out in different ways. If the value exceeds the lifetime tax-free allowance, then in your "silver" years you could be presented with a large tax bill for the pleasure of remaining in your scheme... potentially negating the income tax benefits of making extra contributions in the early years?

I don't fully grasp this issue, maybe someone else could clarify if I am on the right lines?

tushingham

racing_blue wrote: »

Sorry ChopperST I misunderstood. I thought it might have been possible for you to have started contributing to a different scheme aged 21 and then had a career change, or maybe if you had had some sort of industrial sponsorship through university.

Anyway, the reason for seeking to clarify was to do with the tax-efficiency of making additional pension contributions in your early 30s, if there is a chance you may later hit the lifetime limit. I suspect this could well apply to a Consultant in Emergency Medicine earning more as they get more senior, though am not sure. I guess could apply to people in your job too?

My concern is that you earn highly, work for a lot of years (eg I think you are talking about 47 years?), and have an defined benefit occupational scheme. The notional value of these schemes is worked out in different ways. If the value exceeds the lifetime tax-free allowance, then in your "silver" years you could be presented with a large tax bill for the pleasure of remaining in your scheme... potentially negating the income tax benefits of making extra contributions in the early years?

I don't fully grasp this issue, maybe someone else could clarify if I am on the right lines?

You are absolutely on the right lines. The nhs pension is complex and as well as the lifetime allowance I think there's some sort of yearly limit calculated on a 3 yearly basis. Both things take into account all pensions including private.
This all means that for some people increased contributions and avcs are not going to be tax efficient in the long term.
Think theres lots of info on the net but in the end I took my relative to see an expert on nhs pensions because it's so complex and I couldn't get my head around it to give any form of guidance

t

gadgetmind

tushingham wrote: »

The nhs pension is complex and as well as the lifetime allowance I think there's some sort of yearly limit calculated on a 3 yearly basis. Both things take into account all pensions including private.

That's nothing to do with the NHS. This is all part of HMG's war on pensions and the flurry of overly-complex and politically-motivated knee-jerk regulations hit both those saving their own money into pensions (me!) and those getting generous defined benefit pensions (what feels like everyone but me!).

richto

Likely you would be better off to take the personal income via a Limited Company if you can and extract the profit as dividends...